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I am a H1-B visa holder in US. This year, I opened an S-Corp and acted as a passive investor. I invested 30k into the business but the business has not been able to generate any revenue yet. Can I file that 30k investment in my tax return as an investment loss?

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Submitted: 8 months ago.Category: Tax
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Answered in 8 hours by:
9/16/2017
Tax Professional: emc011075, Tax adviser replied 8 months ago
emc011075
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Hi. My name is ***** ***** I will be happy to help you.

No, you cannot. What you investested represents your basis in Scorp. To claim the losses you would have to walk away from the investment or dissolve the scorp. But in both cases you would probably walk away with some return on investment.

As passive investor you are subject to passive loss limitation rule. It means that you can only deduct passive losses from other passive income on your tax return. If the scorp get bankrupt you can claim investment losses limited to 3K per year.

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Tax Professional: emc011075, Tax adviser replied 8 months ago

Make sense? You cannot claim investment losses until you actually lose them with no chance of getting your investment back. As long as your money are invested in your scrop they are not lost.

And your passive investor status makes it also more difficult because your losses can only be deducted against other passive income (from other corp, scorp or partnership), unlike a shareholder with active participation (shareholder who is directly compensated by the scorp).

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