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Level 1
posted Apr 12, 2025 1:40:25 PM

Investment loss in a startup - Convertible note

I invested $15K in a startup few years back to fund company operations. The investment was structured as a convertible note with annual interest of 6% and payable at maturity. Company folded operations and founder is no longer responding to any communications. I hope I can claim this as investment loss this year. Please help how I can report this in Turbotax Desktop edition. 

 

Thanks!

0 3 1002
3 Replies
Expert Alumni
Apr 12, 2025 1:47:32 PM

You can enter as Worthless Security.  To enter worthless investment as investment sales:

Under Federal Wages& Income, select Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B) under Investments and Savings.

  1. Did you have investment income in 2024? YES
  2. Let's import your tax info  Enter a different way
  3. OK, let's start with one investment type Other Continue
  4. Tell us more about this sale  Worthless Stock Continue
  5. Now, enter one sale for WORTHLESS STOCK (Proceeds=0 Date sold or disposed= 12/31/2024)
  6. Let us know if any of these situations apply to this sale  This was a worthless security  Continue

Level 1
Apr 12, 2025 3:23:54 PM

Appreciate your quick response. It's a Convertible Note or loan, not equity. Should I still select Stock as investment type?

Expert Alumni
Apr 15, 2025 9:24:58 AM

Since it is a loan, it would be deductible as a bad debt, which gets short-term capital gain treatment. It is deductible against capital gains and up to an additional $3,000 deduction per year. Unused deductions are carried over to the next year. You enter that in the Other Deductions and Credits section of TurboTax, then Nonbusiness Bad Debt. You can learn more in this IRS tax topic 453.