- The involved company had a registered Service Mark (with the TM office) which we’ll call it, “XYZ Corporation”. Given that to maintain a Trademark or Servicemark you MUST continue to use the SM or TM in commerce which will no longer be true now that the business is closed. Hence the Trademark will become worthless and must be “Abandoned” with the Trademark office. In closing the company books the trademark therefore cannot be transferred to the shareholder(s) . How do I handle the loss of trademark value on the final tax return?
only out-of-pocket costs paid by the corporation and which were capitalized can be written off as worthless - an ordinary loss
from IRS PUB 535
Loan or capital contribution. You cannot claim a bad debt deduction for a loan you made to a corporation if, based on the facts and circumstances, the loan is actually a contribution to capital. that's how the shareholders' loans should be treated which means they get a capital loss for money loaned to the Corporation that was not repaid.
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sorry but sweat/equity is not recognized for tax purposes.
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the founding shareholder should take into account the Fair Market Value of assets received in liquidation in determining their capital loss.
