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Level 2
posted Apr 13, 2023 3:05:41 AM

How to claim a capital loss from a venture-related investment in a PRIVATE business that is in Chapter 7 bankruptcy?

Any of the TurboTax experts know how to claim a capital loss from a venture-related investment in a PRIVATE business that is in Chapter 7 bankruptcy?

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1 Best answer
Level 2
Apr 15, 2023 8:54:23 PM

Since the loss was on preferred stock for a private company with no 1099-B issued, I created a 1099-B entry with "no brokerage statement" for the sales, the choice "not reported to IRS", entered the cost basis(my investment), final value ($0) as the proceeds, and the date of bankruptcy filing as the sales date.  I also selected "long-term" as the box F holding period.  I filled in no other fields nor selected any boxes for the following screens. 

Federal return was accepted.

3 Replies
Level 2
Apr 13, 2023 3:11:57 AM

Note that I do NOT have, nor will I have a 1099-B from this private company.

All I have is the recent bankruptcy filing and my original stock shares statement.

Expert Alumni
Apr 13, 2023 5:25:03 AM

You can deduct worthless stock or a worthless investment only in the tax year it becomes completely worthless. This normally happens when the corporation files for bankruptcy, stops doing business, and has no assets.

  1. Enter a worthless investment with a sales price of zero and the word "worthless" in its description. 
  2. Enter the correct cost or basis, date acquired, and December 31 as the date sold.

This is entered in the investment section of TurboTax. Capital gains, losses, and 1099-B forms are all entered in the same place:

  1. Open or continue your return in TurboTax
  2. Search for investment sales and then select the Jump to link in the search results
  3. Answer Yes to the question Did you have investment income in 2022?
    • If you land on the Your investments and savings screen, select Add investments
  4. On the Let's import your tax info screen, select Enter a different way.
  5. On the OK, let's start with one investment type screen, select Other (land, second home, personal items) 1099-S and Continue.
  6. Continue through the screens to enter your investment and we'll calculate the gain or loss from the sale

 Related Information:

Level 2
Apr 15, 2023 8:54:23 PM

Since the loss was on preferred stock for a private company with no 1099-B issued, I created a 1099-B entry with "no brokerage statement" for the sales, the choice "not reported to IRS", entered the cost basis(my investment), final value ($0) as the proceeds, and the date of bankruptcy filing as the sales date.  I also selected "long-term" as the box F holding period.  I filled in no other fields nor selected any boxes for the following screens. 

Federal return was accepted.