Investment in default

[artatac]

I have an investment in an alternative investment platform. My initial investment has been in default for 4 years, as the company pursues recovery. I don't know if or when the money will be recovered, so I'm wondering if I can write it off as a capital loss.

[Anonymous_]

See https://www.thetaxadviser.com/issues/2012/sep/clinic-story-07.html

and 

https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home/losses-homes-stocks-other-property/lo...

[Opus 17]

Generally, you can't take the capital loss until you realize it (make it real, by selling, or having it declared worthless, etc.).  As long as there is still an open recovery process, the amount of your loss is only speculative.  When the recovery process is closed, and you recover whatever you can (whether some percentage or zero) then you would report the capital loss.

Can you find someone to buy your rights in this investment today, maybe for $1?  Then your loss is realized and you could deduct it on your 2024 return (it is too late for 2023).  Then the person who bought the investment from you would get whatever money does get paid out in settlement.   Otherwise, you need to wait for the process to conclude. 

[artatac]

Thanks for the reply and the information. I appreciate the help.