Yes, it does apply to bankruptcy rules and is consider it a nonbusiness 'bad debt'. Keep the documentation to prove the crowdfunding investment is completely worthless, never to return any of your investment.
A nonbusiness bad debt must be treated as a short-term capital loss. See Publication 550 for what qualifies as a nonbusiness bad debt (TurboTax will enter it on Part I of Form 8949).
How do I deduct worthless stock?
- Type in investment sales in the search box, top right of your screen, then click the magnifying glass
- Click the jump to investment sales link in the search results
- Follow screens to enter your loss and online instructions
- Select short term since it is a bad debt from bankruptcy
@wgolab
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