topic Investment loss in a startup - Convertible note in Investors & landlords

Investment loss in a startup - Convertible note

HumbleBear19 — Sat, 12 Apr 2025 20:40:25 GMT

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!

Re: Investment loss in a startup - Convertible note

MaryK4 — Sat, 12 Apr 2025 20:47:32 GMT

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.

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

Re: Investment loss in a startup - Convertible note

HumbleBear19 — Sat, 12 Apr 2025 22:23:54 GMT

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

Re: Investment loss in a startup - Convertible note

ThomasM125 — Tue, 15 Apr 2025 16:24:58 GMT

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.