Can a loss investment from an unfulfilled Kickstarter pledge, from a failed creator that didn’t provide the promised reward, be considered a nonbusiness loss debt?

[yo000]

They claimed, due to COVID they couldn’t fulfill their promise, they kept the investment and Kickstarter is not responsible.  Bank said it  was too late for a fraud claim.  Kickstarter -investment on a product creation with the promise of the the first production items like pre-order a well defined prototype.

[Mike9241]

Michael Royce from Artspire, a tax deductible crowdfunding platform, surprised Silverman during the course of the show with the news that Kickstarter donations were not tax deductible. Silverman may also be surprised to learn that he owes taxes on that money, a topic that has recently received coverage as people sort out the details of crowdfunding.

[yo000]

Thanks for your response! That blog is talking about the creators position- the person receiving money. In most situations with Kickstarter people don’t make a donation, they invest expecting payment back either with merchandise or refund.  My question is on money loss from quitting creator. 

[DianeW777]

It sounds more like a gift from backers as opposed to the tax consequences of the creator. If this is the case then there is nothing such as a nonbusiness loss for tax purposes on the part of the backer.

'Some projects that are funded on Kickstarter may go on to make money, but backers are supporting projects to help them come to life, not financially profit.'

In this scenario the backers may let someone take their money to do as they wish, and they aren’t guaranteed they will get the money back. This essentially describes a gift.

[yo000]

Thanks for your response!

Definitely not a gift.  These was tested prototypes coming to creation from a successfully award wining company for children products.  Not delivered claiming production problems due to COVID. As written by Kickstarter (When a project is successfully funded, the creator is responsible for completing the project and fulfilling each reward to the best of their abilities. Their fundamental obligation to backers is to finish all the work that was promised, honestly address backers’ concerns, and deliver rewards.)

Just like when the laser spine institute took deposits from surgery one day and closed their doors the next day, not refunding any money for the prepayments.