We invested $125,000 as shareholders in a start up company. The company failed and shut down. Where on TT do I declare that loss?
I understand I can one can only take $3,000/year in deductions against active income, but how do I establish that I had this loss in 2022 and begin taking my $3,000/year deduction?
was this an S-Corp because your investment must first be reduced by the loss shown on the k-1 and then by any cash you got back. in other words, in the case of an S-Corp, as you describe the situation, there would likely be no capital loss. For a C-corp you show the loss on form 8949. Proceeds zero tax basis $125K. that capital loss is first used to offset any other capital gains. any remaining loss up to $3K can be used in the current year with any remaining loss carried over to 2023 where the same rules apply. first any offset then the remaining loss up to $3K is deductible. and whether the loss is short-term or long-term depends on when the C-Corp started and was liquidated. if this all occurred in 2022 most definitely it would be short-term. (holding period 1 year or less).
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