Accepted Answer

Hello dave,

No matter whether or not you classify this as a gift or an investment, it is not tax deductible.

Gifts are never tax deductible. You are allowed to give gifts each year of up to $13,000 without any filing requirements. Any gifts which exceed that amount require a gift tax return to be filed by the donor and the donor may be subject to gift tax once he reaches his lifetime exemption of $1 million.

If you treat this as an investment, then it is no different than if you buy stocks or bonds or any other type of investment. You cannot deduct money that you invest. If you invest money in this company and they give you a percentage of the profits, then you would pay tax on the profits that you receive as ordinary income. If you give them money as an investment and at some point in time you never receive your money back and the company dissolves, then at that point you would have a tax write off for your loss.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you dave.

Expert:	Merlo
Pos. Feedback:	99.8 %
Accepts:
Answered:	5/21/2009

Accountant

25+ years tax consulting. Specializing in returns for US citizens living abroad