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Author: LAPhil One star, 50 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121095  
Subject: Final K-1 for a failed company Date: 3/23/2011 9:58 AM
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Hi Fools,

A few years ago I invested in a private company. I received a K-1 in 2009 which showed a partial loss. The company ended up shutting down in 2010 but never issued me a final K-1 showing a total loss. Am I required to have this final K-1 in order to write off this loss? If so, should I ask the other investors to contribute to the accounting costs needed to produce the final K-1? That seems like the only way to produce this final K-1 as the company does not have the funds to do this now.

Thanks
Phil
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Author: LAPhil One star, 50 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 112868 of 121095
Subject: Re: Final K-1 for a failed company Date: 3/29/2011 9:34 AM
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Hi Fools,

A few years ago I invested in a private company. I received a K-1 in 2009 which showed a partial loss. The company ended up shutting down in 2010 but never issued me a final K-1 showing a total loss. Am I required to have this final K-1 in order to write off this loss? If so, should I ask the other investors to contribute to the accounting costs needed to produce the final K-1? That seems like the only way to produce this final K-1 as the company does not have the funds to do this now.

Thanks
Phil


Hi Fools,

Has anyone had to deal with a failed private investment?

Thanks
Phil

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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 112869 of 121095
Subject: Re: Final K-1 for a failed company Date: 3/29/2011 10:12 AM
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Hi Fools,

A few years ago I invested in a private company. I received a K-1 in 2009 which showed a partial loss. The company ended up shutting down in 2010 but never issued me a final K-1 showing a total loss. Am I required to have this final K-1 in order to write off this loss? If so, should I ask the other investors to contribute to the accounting costs needed to produce the final K-1? That seems like the only way to produce this final K-1 as the company does not have the funds to do this now.

Thanks
Phil

=============================
Have you been in communication with the company's management about a final tax return?

Of course you could file your return and claim the loss for your remaining basis. It would be nice to have some documentation for that, of course.

What kind of company was it? A partnership, LLC, S-Corp?
Were articles of dissolution filed? Can you get a copy?
If you had that, it's better than nothing.

What was your role in the company? Were you an officer, managing member, whatever? If so, you might have a personal responsibility to file the final return for the company.

And if it was an S-Corp, and the shares were issued directly to you, you might qualify to take the loss on your stock as a 1244 (ordinary)loss, instead of a capital loss.

Bill

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 112870 of 121095
Subject: Re: Final K-1 for a failed company Date: 3/29/2011 10:21 AM
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A few years ago I invested in a private company. I received a K-1 in 2009 which showed a partial loss. The company ended up shutting down in 2010 but never issued me a final K-1 showing a total loss. Am I required to have this final K-1 in order to write off this loss? If so, should I ask the other investors to contribute to the accounting costs needed to produce the final K-1? That seems like the only way to produce this final K-1 as the company does not have the funds to do this now.

You can use your personal records to create the appropriate entries for your tax return. However, the actual mechanics of how to do this will be highly dependent on the specifics of the company. You will probably need to find someone who has experience with similar issues to make sure everything is done correctly. (The issue is that part of your investment loss may be ordinary income(loss) and part capital loss.)

Ira

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Author: LAPhil One star, 50 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 112995 of 121095
Subject: Re: Final K-1 for a failed company Date: 4/5/2011 8:18 PM
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Have you been in communication with the company's management about a final tax return?

Of course you could file your return and claim the loss for your remaining basis. It would be nice to have some documentation for that, of course.

What kind of company was it? A partnership, LLC, S-Corp?
Were articles of dissolution filed? Can you get a copy?
If you had that, it's better than nothing.

What was your role in the company? Were you an officer, managing member, whatever? If so, you might have a personal responsibility to file the final return for the company.

And if it was an S-Corp, and the shares were issued directly to you, you might qualify to take the loss on your stock as a 1244 (ordinary)loss, instead of a capital loss.



Bill,

I have been communicating with the company's president and it turns out that one of the reasons the company has not filed its taxes is due to a large tax liability from 2009. Filing in 2010 would mean it would have to settle that liability.

The company was an LLC.

I was a passive investor in the company. I was not on the board but I was invited to attend annual meetings and vote. What is the responsibility of the board to file final returns? I would like them to take ownership of this issue but instead they are replying that they don't have the funds to perform the final accounting.

Thanks for your reply.

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