By an equity interest I assume you mean you purchased stock in the company. If so, it may qualify for section 1244 treatment, which means the loss would be an ordinary loss, not a capital loss. In this case, you would not net it against capital gains from other investment sales, but rather you can write off the $100,000 (If you are filing married joint, only $50,000 if single) against ordinary income.
Here are the qualifications for section 1244 small business stock:
- Must be stock in C or S corporation
- Stock is owned by individual or partnership
- TP must be the original owner of the shares
- Must be domestic corporation
- Must have been issued in exchange for cash or property
- Total capital contributions to the corporation less than $1 million at time stock issued
- No more than 50% of gross receipts for 5 most recent years from rents, royalties, interest, annuities, or gains on sales of stock or securities
If your transaction qualifies for section 1244 treatment, you would report it on form 4794, as mentioned by @Rick19744
As such, it would be subtracted from your other income reported on your tax return, so indirectly it would reduce any capital gain income your report.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
