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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
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I started a business 2 years ago that I had to close last year.

Customer Question

I started a business 2 years ago that I had to close last year. I lost my entire cash investment in the venture. It was a Delaware C Corp.
I was advised by someone at TurboTax that the only way to record this loss is by entering it as a stock loss ... in other words a Capital Loss.
But I was under the impression that this can count as a deduction against income.
Which is the case? If it can count against income, please help me figure out how/which form to enter it on ...
Submitted: 6 months ago.
Category: Tax
Expert:  Lev replied 6 months ago.
If you run business as C-corporation - you should be aware that C-corporation is SEPARATED legal and taxing entity.So all income and deductions are reported on corporate tax return - and not your individual tax return.If you contributed the money into C-corporation - these contributions are added to teh basis you have in shares of the corporation - and that is not deducted on your tax return.If the money were used for qualified business expenses - these expenses are deducted on corporate income tax return - form 1120.If the corporation realized business loss - that loss is NOT passed to you as a shareholder.
Expert:  Lev replied 6 months ago.
The original advice you were given is correct - You may ONLY realize capital loss and ONLY if the corporation is dissolved.As long as you still own shares of that C-corporation - there is no loss for you personally.If however - the corporation is dissolved - that is reported as the sale of corporate shares - and depending on your basis - you will likely realize capital loss..I appreciate if you take a moment to rate the answer.Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you will all tax related issues.