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TaxRobin, Tax Preparer
Category: Capital Gains and Losses
Satisfied Customers: 15716
Experience:  15+ years in Tax preparartion as well as Instructor for tax law, theory, and application
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I have invested in a risky private placement. I have heard

Customer Question

I have invested in a risky private placement. I have heard that IF the total capitalization is < 1,000,000 and the venture tanks, I can expense the loss rather than take the $3k/year loss against other income. Is this true? And what are the IRC references?
Submitted: 2 years ago.
Category: Capital Gains and Losses
Expert:  TaxRobin replied 2 years ago.
Hello and thank you for posting your question.
If your investment is a loss or becomes worthless it is a capital loss and is subject to the capital loss rules.
Section 1244 does allow for an ordinary loss on stock by the original owner. (a) General rule
In the case of an individual, a loss on section 1244 stock issued to such individual or to a partnership which would (but for this section) be treated as a loss from the sale or exchange of a capital asset shall, to the extent provided in this section, be treated as an ordinary loss.
For a privately held company, you must show that the company is dissolved or no longer operating.
Expert:  TaxRobin replied 2 years ago.
Please respond if you need clarification