Bankruptcy recognition date

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I have an LLC Partnership with an adjusted basis of $ 251,000 at the beginning of 2021. I did not receive K1 for 2021 but the LLC filed bankruptcy 3 months ago in June 2022. I did not expect either K1 or any money back. I have capital gain $450,000.

I am thinking report worthless in and claim a loss of $25100. The question is the bankruptcy filed in 2022 before filing the return of 2021.

I am looking for the community suggestion.

When do we recognize the loss in 2021, in 2022 or as per the return of the LLC.

Anonymous_

Level 15

Most likely in 2022 when your investment became worthless but it depends.

Is this an PTP?

@Mike9241

Mike9241

Level 15

bankruptcy does not indicate worthlessness. some companies having difficulties paying their obligations file for bankruptcy to hold off creditors until they can reorganize seeking to have certain obligations/debt discharged or reduced. if they can't then they file for liquidation but even then there could be some worth to owners just not very much. if there is worth the IRS would say you are not entitled to any write-off even if it's only $1.

I provide a link to an article about when a stock is worthless. I would say the same applies to the LLC

https://www.journalofaccountancy.com/issues/2013/nov/20138596.html

you'll have to make the determination as to worthlessness on 12/31/2021 (assumed year-end of the LLC). the date of filing for bankruptcy is not controlling and in fact, may not indicate total worthlessness.

Mike9241