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I couldn't find anything like my condition in the
faq, so I hope I'm not asking something that has been asked before. This is my situation:

Several years ago I joined a little starup company with the agreement that I would receive a salary and some stock in the company if I remained with them. The stock vested in 1998, so I now own part of the company. They were not stock options; I was simply given shares. I worked at the company full time last year. The company has fewer than five full time employees, and I believe less than five shareholders.

This year I received my first K-1 from the company, which showed a net. Can I take the loss as a write-off on my tax return, or would my loss not meet the "at-risk" requirement because my basis for the shares was effectively $0.00? I assume the sweat equity to get the shares won't impress the IRS.

Any thoughts?


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