Can I claim principal and compounded interest loss on an investment?

[seedavelee-gmail]

Can I claim compounded interest loss as well as my principal loss on an investment?

[Anonymous]

not sure.  has the investment become worthless or have you sold it. if neither and it's just a market value decline, no current loss is available. if you haven't reported the interest as income you have no deduction.even if you have if it's something like on a zero-coupon bond the same rules would apply no deduction until investment becomes worthless or you dell it. the interest discount accrued would be added to the cost of investment.  

[seedavelee-gmail]

It was sold and the capital loss was severe returning .13 cents on my original investment of $100k .  Over the course of 13 years I reinvested my interest rather than receiving it as passive income (have documentation of this).  With this it  more than doubled my original investment.  I know I can claim my principal investment of $100 k less the $13k (income when it was sold) yet what about all this compounded interest over the years, hence my question.   

Thanks in advance for answering this!

[Carl]

No, not if you didn't pay taxes on it before. You can not claim a tax deduction for income never received, or for income you never paid taxes on in the past.

[Anonymous]

that reinvested income was supposed to be reported as income each year. if you didn't you have no basis - no basis no deduction. 

[fanfare]

what sort of financial product  pays interest (reinvested) every year yet goes to zero ?

[Anonymous]

ever hear of zero-coupon bonds?   sold at a huge discount to par. pay no interest. at maturity receive par.  then there are bonds that are not zero-coupon but have original issue discount (OID). even some US treasury securities are zero-coupon or have OID.  also real estate mortgage investment conduit (REMIC), collateralized debt obligation (CDO) and even certificates of deposit.  see PUBs 550, 938 and 1212

[fanfare]

a zero coupon bond does not allow reinvestment of interest, it doesn't even pay any interest, only imputed interest.

if the zero fails, the imputed interest would be zero.

[seedavelee-gmail]

Thank you for your response.  This helps, I understand.  One last question if I may:  I have a number of K-1's and 6 or 7 of them repot a very small amount of capital income....like a dollar or 2, some show a small loss.  It's 15 minutes of work for me to enter these into Turbo Tax and for what?  It doesn't affect my taxes...just time spent entering this information (tempted to not enter them).  The IRS also receives these K-1's and by not entering them "could" this draw attention to my return (electronic red flag) possibly causing an audit?  I don't have anything to hide, yet prefer not to go through this. 

Again, thank you for answering this!!

[seedavelee-gmail]

Thank you for your response.  This helps, I understand.  One last question if I may:  I have a number of K-1's and 6 or 7 of them report a very small amount of capital income....like a dollar or 2, some show a small loss.  It's 15 minutes of work for me to enter these into Turbo Tax and for what?  It doesn't affect my taxes...just time spent entering this information (tempted to not enter them).  The IRS also receives these K-1's and by not entering them "could" this draw attention to my return (electronic red flag) possibly causing an audit?  I don't have anything to hide, yet prefer not to go through this. 

Again, thank you for answering this!!