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Richard, Tax Attorney
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Experience:  29 years of experience as a tax, real estate, and business attorney.
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A few years ago I sent some funds, $10,000, for investment

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A few years ago I sent some funds, $10,000, for investment to a private real estate investment firm outside the USA. I had hoped to make some return on my investment, but I never received any interest or dividends or return of any sort. I recently received a portion of my original investment back, $8,000, with a letter of regret from the firm, which was going out of business, that I had incurred a loss. I never received any return on this bad investment, only the final loss.

Do I have to report this investment for which there was no return income derived or the $8,000 of my money that I got back at the end?
Submitted: 1 year ago.
Category: Tax
Expert:  Richard replied 1 year ago.
Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good morning. Have you been taking any losses on your tax returns in the interim? Thanks.
Customer: replied 1 year ago.

No, I have taken no losses on this ivestment on my tax return of any sort. I have never included that I made this investment on my tax returns, and since I have received no income from it, I have not reported it in any way.


 


I have seen it more in the way of a loan to a friend that I hoped to derive some financial benefit from, but that did not happen.

Expert:  Richard replied 1 year ago.
Thanks for following up. You can report this as a capital loss on your tax return. You had a return of $8,000 of your original investment of $10,000. Thus, you had a $2,000 loss which you would report on your return.

Pursuant to IRS Tax Topic 409 (http://www.irs.gov/taxtopics/tc409.html)

"If your capital losses exceed your capital gains, the amount of the excess loss that can be claimed is the lesser of $3,000, ($1,500 if you are married filing separately) or your total net loss as shown on line 16 of the Form 1040, Schedule D (PDF). If your net capital loss is more than this limit, you can carry the loss forward to later years."



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Customer: replied 1 year ago.

I guess I want to know if I have to report an investment to the IRS for which I received no income or positive return. If I don't want to claim the loss, or if there is no loss, only the return of the original investment, do I have to even report it?

Expert:  Richard replied 1 year ago.
Thanks for following up. You do not....omitting it would not save you any taxes so you would have no downside to not reporting this. The only exception would be if the investment return sent a 1099 to the IRS evidencing the fact that this amount was sent to you. In that case, you would need to report it as a loss to avoid the IRS treating the entire $8,000 as income since it has no information regarding your basis in the investment.
Customer: replied 1 year ago.

Last part - does the amount matter, if there is no 1099? Say it was $30,000 to this private realestate investment firm outside the USA, and they returned $29,000 to me?

Expert:  Richard replied 1 year ago.
As long as you had a loss, if you don't report it, the IRS is not impacted negatively at all so you would not have an issue. If the amount was in excess of $100,000, since the amount would be coming from outside the U.S., then you would need to report it.
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 46208
Experience: 29 years of experience as a tax, real estate, and business attorney.
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Expert:  Richard replied 1 year ago.
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