capital loss due to bankruptcy

[rausch0007]

In mid 2014 I invested in a oil & gas company (as a limited partner) and received a very limited amount of income ($1,248.00) for first 6 months, and after that nothing.  year end K-1 forms were received showing yearly losses and in 2018 company filed for bankruptcy with the Court making their ruling in September of 2019.  My original investment was $25,000 leaving me with a net loss of $23,752 and as I had no input as to the operations can I claim the $23,752 as a capital loss, and if so where & how do I show it.       

Ken R.

[Rick19744]

You need to spend some time determining you tax basis in this investment before you are able to compute your loss.

Your tax basis begins with the original capital contribution and is adjusted annually for the applicable lines on the K-1 you received.

Currently, your calculation of the loss is incorrect as income is added to your basis, not subtracted.

Another factor is whether or not this oil and gas investment was deemed active and made you a material participant.  Whether you were a material or passive investor based on the facts, the end result will be the same, it is just a matter of whether any losses were taken annually or have been carried over due to the passive activity rules.  I suppose this company could also be a PTP which could change the timing somewhat as well.

For the $$ you have invested, I believe you would be wise to consult with a tax professional who could help you determine your tax basis and ultimately your overall loss.  

[rausch0007]

I've talked to a CPA and he told me how to compute my tax base and my 'capital loss'.  Now I need info (guidance) on where and how to indicate my total capital loss.

Ken

[Rick19744]

You will enter the K-1 and any applicable amounts and make sure you indicate that this is the final K-1.  Based on your initial facts, you may not have received a K-1 but you will need to reflect it as a final K-1.

Keep in mind, at some point you may in fact receive a final K-1 and may need to adjust your gain or loss accordingly at that time.

Kind of stunning that a CPA told you how to compute your tax basis and capital loss, but failed to provide assistance on how to include this on your return.

When you enter the information into TT for the K-1, and you indicate it is final, you will be prompted for information related to the disposition.  The software will ask for sales proceeds and your basis.  Based on your facts, you have this information.

The loss should be reported on Sch D and the applicable form 8949.