I made two failed loans to XXX LLC.
The first loan was on 12/26/2017 for $75,000 to the XXX LLC to be paid back on 1/1/2023 with interest $186,000. The second loan was on 2/25/2019 for $25,001 to the XXX LLC to be paid back on 3/27/2024 for $62,000. When the first loan came due and no re-payment was made - I followed up with the XXX LLC and tried to work a resolution. When the second one came due - I knew there was a major problem. At no time was the loan for any equity. Other lenders also were stiffed by XXX LLC. (I decided against a lawsuit as it would have been costly and lengthy.)
It was not until December 2024, that I finally realized that the XXX LLC was not going to pay. I have a detailed communication trail with the XXX LLC and sole proprietor. I was also then given the Voluntary Dissolution form that stated XXX LLC was dissolved on 7/20/2022.
The issue becomes - how do I take these losses off on my income tax return and for what year do I declare the loss? I think it should be a 8949 form as a Part 2 (F) Long-term transactions not reported to you on Form 1099-B.
As for the year - federal government states that loss should be taken in the year that it is deemed worthless. I did not think it was worthless until 2024 when a resolution could not be met with XXX LLC and the sole proprietor. However, the Voluntary Dissolution that was filed and accepted by the state was dated 7/20/2022.
How do I approach this sticky tax situation?
1. Losses can be recognized and potentially utilized for tax purposes when a business is dissolved or when losses are realized. You have the option to amend your 2022 return to claim the loss or use it on your 2024 return. You are correct with the long term loss on 8949.
2. Choose the year that works best for you. Look into your state requirements to help finalize your decision.