How to claim a loss from a crowdfunding investment at Realtyshares.

[JimBob6]

They are not providing a K-1. How do I claim a loss?

I emailed the company and they stated 'for debt structured investments that have a loss of principal, There will be no tax documents provided. This is because there was no interest income that would have created a taxable event. Therefore you will need to provide your tax adviser with a copy of your subscription agreement, a copy of the distributions and a copy of the updates provided on your investor dashboard for the tax adviser to record the loss. Your adviser will indicate a difference between what was received as principal and what was originally lent.'

How does this work in turbotax?  thank you!

[RobertB4444]

You have an unrealized loss.

In order to claim it it has to be realized, so you have to sell the investment.  As of right now the loss only exists inside the investment.  There remains the possibility (only you know whether it is a remote possibility) that the investment could recover the value you have lost.  Until you have sold it we will not know.

The other, worse, possibility is that the company that you have invested in goes completely broke and becomes worthless.  On the date that that happens you can take a loss for your entire original investment in the company.

In the meantime you just have to wait and hope for the best.

[JimBob6]

Thanks but there already has been a loss realized. My investment was 20k and the property sold for 5k. How do I report that in TurboTax?

[JimBob6]

I meant my share of the property went from 20k to 5k. Thanks. 

[ThomasM125]

If there was a sale or disposal of your investment, you would follow these steps to report it in TurboTax:

While in the Federal section of TurboTax: 

  1. Income and Expenses

  2. Investment Income

  3. Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B)

Choose the category of investment you want to enter and follow the instructions to enter your investment sale.  You will be asked to enter the sale proceeds, cost basis, date of acquisition, date of sale and other pertinent information to make sure the sale is reported properly on your tax return.

[JimBob6]

Thanks. I tried to enter this information in turbotax, but its not showing a loss:

[DianeW777]

Based on your comments you do have a sale of investment property.  If it was held for more than one year (one year plus one day) then you will be considered long term, if held for a shorter period it would be considered short term. The maximum investment loss allowed in one tax year is $3,000 with a carry forward of the remainder of the loss.  Before this occurs, any gains will be offset by the loss and only the excess will reduce your income up to the maximum allowed in one calendar year.

• What is a capital loss?

You should select 'Other' as the type of investment, then you should select that your purchased it. If you had any sales expense this would be added to your cost basis.  Use the steps in the link to enter your sale and see the image provided for assistance.

• Where do I enter an investment sale?

[JimBob6]

Thanks!  I think I got it to work.  Do I need to submit any documentation with my tax return?

[Rick19744]

@JimBob6 let's make sure we understand the facts:

• You made an investment in RealtyShares of $20,000 based on your response
• Was your investment only in a single property?
• Is your investment in RealtyShares complete?
• I do see significant discussion related to the "demise" of RealtyShares.  So are you claiming that the business is now defunct and some investors may get some liquidating proceeds, but not any crowdfunding investors?

[JimBob6]

Single property.

Investment is complete.  It was sold at a loss.

RealtyShares is defunct and they are winding down all their investments.  I did not invest in the company itself, only the properties they were sponsors for.

[Rick19744]

Just maintain all the details you have available to support the actual loss.

Get this information now in order to have it available in the event the IRS audits your return.

I'm assuming, based on your response, that you were never going to get a K-1 and that this was a one time investment and the sale of the property triggered the recognition of loss event.

This is not a real clear area (crowd funding investments) and one fraught with loose ends and exposure.

[JimBob6]

Thanks!  Yes I’m not going to get a K-1. Appreciate the help!

[jtax]

I had the same experience. I think RealtyShares debt investments that go bad are exactly that. They are bad debts. See https://www.irs.gov/taxtopics/tc453

The RealtyShares investments that were equity investments will generate K-1s and have different reporting complexities depending upon the deal structure/results and prior passive activity loss limitations.

[JimBob6]

Hi, yes, it was a debt deal which ended up failing and I took a big loss on my initial investment.  So its not a 1099-B then?  where do I file the 8949 form in turbotax?

[JimBob6]

Nevermind, I checked the forms section of turbotax and it looks like it was entered correctly.  Thanks for your help!