Large Loss

Today TaxMama hears from Clay in California, who tells us. “I invested in a company that failed. Where is that handled on the 1040 form? I have had other failures and I was only allowed to deduct $3,000 per year. I have a substantial capital gain this year on a sale of properties.”

Hi Clay

It’s not totally clear how you invested in the company. Are you talking about having bought stock or an interest in an LLC or other entity – and the stock or share becomes worthless?

Yes? That’s easy. Just report the purchase on Schedule D. Enter –0- for the sales price. Your sale date will be the date the company shut down, or the date you learned the company was no longer operating.

In the past, when you were only able to deduct $3,000 of your loss, that was because you had no gains to offset the losses.

This time, you’ll be able to deduct all your losses from the portion of the gains that are reported on Scheduled D – PLUS $3,000 in losses, if the gains haven’t used up the losses.

Does this help?

And remember, you’ll find answers to lots of questions about capital losses and other tax information, free. Where? At

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