how to write off angel investment loss

[avo]

i invested in a startup via wefunder in 2019. last year, there was an announcement about the dissolution. basically the money i've invested is now gone.

how do i go about writing off the amount on turbo tax? there are no forms issued to me, no 1099-B or anything at all. it's just a stamped letter of the dissolution. please let me know where do i go to enter the loss in turbotax.

thank you.

[ee-ea]

You can deduct worthless stock 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. Financial difficulties won't make a company's stock worthless unless there is no hope that the company will pull through.

Enter a worthless stock like any stock sale but with a sales price of zero and the word "worthless" in its description. Enter the correct cost or basis, date acquired, and December 31 as the date sold.

To enter worthless stock as investment sales:

1. Open (continue) your return in TurboTax.
2. In the search box, search for investment sales then click the "Jump to" link in the search results.
3. Answer Yes to the question Did you sell any investments?
   • If you land on the Here's the investment sales we have so far screen, click Add More Sales.
4. Answer No to the 1099-B question.
5. On the next screen, select the type of sale you had (stock, second home, collectible, land etc.) and click Continue.
6. Continue following the onscreen instructions to enter the sale.

[#3]

You can deduct worthless stock 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. Financial difficulties won't make a company's stock worthless unless there is no hope that the company will pull through.

Enter a worthless stock like any stock sale but with a sales price of zero and the word "worthless" in its description. Enter the correct cost or basis, date acquired, and December 31 as the date sold.

To enter worthless stock as investment sales:

1. Open (continue) your return in TurboTax.
2. In the search box, search for investment sales then click the "Jump to" link in the search results.
3. Answer Yes to the question Did you sell any investments?
   • If you land on the Here's the investment sales we have so far screen, click Add More Sales.
4. Answer No to the 1099-B question.
5. On the next screen, select the type of sale you had (stock, second home, collectible, land etc.) and click Continue.
6. Continue following the onscreen instructions to enter the sale.

[avo]

hi,

thanks for answering my question.

i did a search for investment sales, and jump to the section as requested.

however, there's no question about 'did you sell your investments'. it went to the list of my income from my bank interests. no question. there's a button below that says 'add investments'.

am i missing something?

thank you.

[ThomasM125]

You can follow these instructions to add an investment sale or disposition in TurboTax:

1. Choose the Federal option on your left menu bar
2. Choose Wages & Income
3. Choose the Investments and Savings (1099-B, 1099-INT, 1099-DIV, 1099-K, Crypto) option
4. Choose Add investments
5. Choose the Stocks, Bonds, Mutual Funds option and follow the instructions

Indicate that you don't have a from 1099-B and use the summary option to simplify your entry:

[avo]

when i chose 'add investments', it shows me on the next screen a list of financial institutions (to try and import the data for me). so i chose 'enter a different way', then select 'stocks, bonds, mutual funds'. 

but on the next screen, there's no option to indicate i don't have the 1099-b. it asked 'Which bank or brokerage is on your 1099‑B?' it's mandatory cos i can't move on from here unless i answer that question.

instead of choosing 'stocks, bonds, mutual funds', can i select 'Other' (land, second homes, personal items) instead? that seems to let me move on without asking for the 1099-b.

i didn't come across the screen with the summary option.

[PattiF]

It is an awkward way to enter this without a 1099-B. Here are the steps starting with the Which bank or brokerage is on your 1099-B? Enter something in that space and continue.

This example uses Collectible as the type of investment. Enter your type of investment.

@avo 

[avo]

hi @PattiF

thank you very much for your step by step instructions.

is it ok to select 'Other' instead of 'Stocks, Bonds and Mutual Funds' under the Investment Type? I selected 'other', it didn't ask me for bank or brokerage, and i entered all the information, date acquired (2019) and dissolution (last year), and it looks like it's all good. based on the info that i've entered, it categorized it as

• Long-term (box F) = Long-term did not receive 1099-B form

[PattiF]

Yes, that is a great way to enter this investment loss.

@avo

[avo]

thank you! 

[djkessler]

I believe that the reply thread is not fully accurate. You can certainly write off the stock as a capital loss. However, there is section 1244 of the IRS code that basically lets you write off a loss against income rather than a capital loss. The appropriate form to file is the 4797. I'm trying to use it for the first time right now and that is what brought me to this page. I see that you entered your message for 2023, so this may be too late to help you, but perhaps it could help someone else in the future.

I was going to enter the data into TT's form view, but figured out (with the help of some out-of-date but useful comments from the community) how to get TT to do the work. Basically, treat the loss as an investment loss. Lie to TT about having a 1099-B for the company and at the end of the dialog, there's a box to check indicating that it's a 1244 stock.

If you're looking for the thing to do for a successful exit, investigate section 1202.

Good luck with your investments.

*** I am not a tax pro, so don't believe anything that I've said here.