I owned a business structured as a C corp, which closed and lost my entire investment. How do I report this loss, can I claim a deduction for this?

[PatriciaV · Accepted solution]

Yes, if the corporation dissolved on or before the last day of the tax year, you may report that the investment was disposed of (basically a sale for zero dollars).

You may report this under the Investment Income area of Wages & Income under Federal Taxes.

1. Choose Federal Taxes >> Wages & Income, then "I’ll Choose What I Work On."
2. Investment Income >> Stocks, Mutual Funds >> Start/Update.
3. Type of Investment: Everything Else (you may choose "Stock" but the entry screens are different)
4. Enter a description, Net Proceeds = $0 and date of sale equal to the date of dissolution.
5. Acquired: whatever method fits
   
6. Cost Basis: your total investment
7. Date of Acquisition: the first date you bought stock

Continue to the end of the section to save your entries.

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).

[grekhi]

I have a similar question. I started a C Corp and funded all the dev, marketing, miscellaneous costs associated with running the business for 3 years. Unfortunately we were not able to raise capital and are in process of dissolving the C corporation.  Are that dollars I put in treated as an investment? If not, how do I show that as an investment? Also, does the C Corp issue something to shareholders?

[pgsinclair]

Look at the specifics of Section 1244. If it qualifies as Section 1244 stock then you can write off as an ordinary loss $50,000 ($100,000 if married filing joint) in the year the business is closed. Any remainder will be written off as a capital loss.

[carlosslimreal]

Hi, thanks for the great answer regarding capital loss carry forward.

What about capital loss carry backward? 

I have a similar situation except I want to know if I can carry backward the capital loss to a previous year. Is that possible, such as via the TCJA, or the CARES act? If I owe taxes from the previous year (in 2017-2019), would I be able to offset the taxable income in those previous years via a capital loss carry backward, to lessen my tax debt of a previous year?

(Or forget the tax debt, in the case of no tax debt, could other people claim refund..)

[DawnC]

If your capital losses exceed your capital gains, the amount of the excess loss that you can claim to lower your income is the lesser of $3,000 ($1,500 if married filing separately) or your total net loss shown on line 21 of Schedule D.   Claim the loss on line 6 of your Form 1040 (PDF).  If your net capital loss is more than this limit, you can carry the loss forward to later years.  You may use the Capital Loss Carryover Worksheet found in Pub 550 or in the Instructions for Schedule D to figure the amount you can carry forward. 

For a corporation, capital losses are allowed in the current tax year only to the extent of capital gains. A net capital loss is carried back 3 years and forward up to 5 years as a short-term capital loss. Carry back a capital loss to the extent it doesn’t increase or produce a net operating loss in the tax year to which it is carried. Foreign expropriation capital losses cannot be carried back, but are carried forward up to 10 years. A net capital loss of a regulated investment company (RIC) incurred in tax years beginning before December 23, 2010, is carried forward up to 8 years. There is no limit on the number of tax years a RIC is allowed to carry forward a net capital loss incurred in tax years beginning after December 22, 2010.

For more information about corporate capital losses, see Capital Losses in Pub. 542, Corporations.

[prof531]

I started a LLC with some friends several years ago. We dissolved the company this past year.  I need to know how to report the $3200 that I received from the $5000 that I invested.

[MarilynG1]

@prof531 An LLC files Form 1065: Partnership Return of Income. The annual Form 1065 must also include a Schedule K-1 for each member. Schedule K-1 reports the member’s share of LLC income, deduction, and tax credit items. These amounts are then included on the member’s personal tax return.

Click this link for more info on Reporting LLC Income.

You would then report the Final K-1 on your return with the income you received as a partial return of your investment.

This link gives more detailed info on LLC Tax Filing you may find helpful.