I invested 50K in a start up in 2016, the company filed for bankruptcy and dissolved with no return for investment in 2019 Nov. how do I claim this as tax credit?

You can claim this as a loss on the sale/disposition of an investment, but only in the year when the investment became worthless (e.g. the year they filed bankruptcy).

 

See How do I deduct worthless stock? for instructions on how to make this entry.

 

It appears you would need to amend your 2019 return to do this. See How do I amend my 2019 return? for instructions.

 

 

what type of entity was the startup?  if a partnership or S-Corp you should have been getting a k-1 each year which likely would report ordinary losses reducing your taxable income and hence basis.   Only with a C-Corp would you be entitled to a capital loss in the year it went bankrupt.   For a partnership or S-Corp it's likely the losses wiped out your basis so there is no capital loss to report. 

Thank you Mike9241!  I also had an LLC investment (K-1) that went bankrupt this year, but I still had a positive basis in the partnership.  Do your comments mean that I can't get a tax loss for it at all?  Or is there still some way to get some benefit out of this loss? 

To report the loss on the dissolution of your investment, be sure to report this change in status when you enter Schedule K-1. 

 

1. On the page "Describe the Partnership," check the box for "This partnership ended in 2021."
2. In most cases, you would choose "Disposition was not via a sale."
3. Enter the purchase date and date of dissolution as the sale date.
4. Follow the interview to the end to enter the K-1 information, including any loss carryovers.

Thank you that is very helpful