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New Member
posted Feb 21, 2021 10:21:51 AM

I invested in a business (restaurant) in 2020 but coz of covid restaurant never opened and i lost 100% of my investment. Can i write off against my 2020 income?

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2 Replies
Expert Alumni
Feb 24, 2021 11:16:12 AM

It depends. You must have the following information and also documentation that shows the money is completely lost.  

  • There needs to be a basis in the tangible or intangible property
  • Evidenced by closed or completed transactions;
  • Fixed by an identifiable event
  • Sustained during the year of the event

Some of these costs include, but are not limited to inventory impairment or loss due to the virus, needing to abandon any fixed assets due to the virus, any permanent closures of business locations, any fees relating to abandoning a transaction due to the virus, and any securities that became worthless due to the virus. 

 

Based on what you are saying the business never actually operated.  If you have a building, then the loss (or gain) will be reported at the time of sale and not on a current return.  If you simply invested money in an ongoing business concern, and that money is now worthless you may have a bad debt you can report. 

 

Use the following links to determine what kind of loss you actually sustained:

If you invested as part owner and operator of a business then you can use Schedule C to report your expenses even if you had no income.  You would indicate this is the first year and the last year for this business.

 

If the business never opened, then an investment loss would go on Schedule D.  No selling price and only a cost basis.

You can add more questions with more detailed information.

New Member
Feb 24, 2021 11:31:23 AM

Thanks for your response.

This is super helpful.