I invested $6,500 in 2015 in a start up and the business failed how do I deduct my loss

[DDollar · Accepted solution]

Yes, you report this on your personal tax return. You will enter this under the Investment Income area of Wages & Income.

1. Choose Personal >> Wages and Income, then I’ll Choose What I Work On.
2. Investment Income >> Stocks, Mutual Funds >> Start/Update.
3. Type of Investment: Everything Else
4. Enter a description, Net Proceeds = $0 and date of sale = dissolution date.
5. Acquired: Other method
6. Cost Basis: your investment basis at dissolution
7. Date of Acquisition: date you made your investment

TurboTax will calculate the loss on this investment and determine if it was short- or long-term. If you have other capital gains, the loss will offset some or all of the gains. Otherwise, up to $3,000 of the capital loss will go to line 13 of Form 1040 and offset other income. The remaining loss over $3,000 will be carried forward each year until used up (applied to capital gains and/or ordinary income).

[reg-20-flamespla]

If you're in the first $1M of funding you can take a direct deduction, how does TT handle that?

https://www.forbes.com/sites/mariannehudson/2014/11/17/tax-[product key removed]-investor-should-kno...

"This is the most important tip for most angel investors because IRC Section 1244 gives investors the ability to take an ordinary income deduction on losses rather than the standard capital loss deductions. There are caveats such as needing to be part of the first $1 million of capital raised by the company and a few other requirements."

[reg-20-flamespla]

Not sure what happened with that link but

https://www.forbes.com/sites/mariannehudson/2014/11/17/tax-[product key removed]-investor-should-kno...

[reg-20-flamespla]

Hmm the forum is scrubbing the URL for some reason, here's a link....

[reg-20-flamespla]

well this is fun,  just remove the spaces in this

https://www.forbes.com/sites/mariannehudson/2014/11/17/       tax-[product key removed]-investor-should-know/#f670dafd0694

[reg-20-flamespla]

https://www.forbes.com/sites/mariannehudson/2014/11/17/   tax-   tips-   every-   angel-   investor-  should- know/#f670dafd0694