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joeym
New Member

How do I enter a loss from a crowd note investment? This is part of a Seed Invest into a company that has since provided a statement of Dissolution. Thank you!

 
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MonikaK1
Expert Alumni

How do I enter a loss from a crowd note investment? This is part of a Seed Invest into a company that has since provided a statement of Dissolution. Thank you!

If someone owes you money that you can't collect, you may have a bad debt. For a discussion of what constitutes a valid debt, refer to Publication 550, Investment Income and Expenses and Publication 535, Business Expenses. Generally, to deduct a bad debt, you must have previously included the amount in your income or loaned out your cash. For a bad debt, you must show that at the time of the transaction you intended to make a loan and not a gift.

 

See this TurboTax article for information on reporting a nonbusiness bad debt loss.

 

In order to deduct a loss on an equity investment, instead of a bad debt, you would need to be able to establish the ownership, the cost of the share, and that it is worthless.

 

See this thread for a discussion of a similar topic. 

 

See IRS Topic 453 for more information.

 

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