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Author: KMyles Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121572  
Subject: My financial boat to freedom sank, help!! Date: 3/8/2001 6:41 PM
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I foolishly (little "f") dumped a lot of money into an investment club that allowed me to purchase stocks in a company before they went public. Things looked like they were going well, but then the company went belly up. They never went public and to top it off, they claimed bankruptcy. Can I file this loss on my taxes and how much of it can I? I was unfortunately blinded by love and invested mucho dinero into this investment club (my girlfriend's father was the CEO of the club). Here is a list of what I invested:

7/98 = 3,000
8/98 = 3,000
1/99 = 3,000

What should I do? And what material do I need in order to take action? Please help.

Thank you,
Myles
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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47978 of 121572
Subject: Re: My financial boat to freedom sank, help!! Date: 3/8/2001 7:10 PM
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KMyles: "I foolishly (little "f") dumped a lot of money into an investment club that allowed me to purchase stocks in a company before they went public. Things looked like they were going well, but then the company went belly up. They never went public and to top it off, they claimed bankruptcy. Can I file this loss on my taxes and how much of it can I? I was unfortunately blinded by love and invested mucho dinero into this investment club (my girlfriend's father was the CEO of the club). Here is a list of what I invested:

7/98 = 3,000
8/98 = 3,000
1/99 = 3,000

What should I do? And what material do I need in order to take action? Please help."


No real answers, but how was the club legally able to buy shares before the company was public? I am way outside my normal purview, but even sales of non-public stcok are subject to SEC requirements, as I understand the rules, and possibly state law (Blue Sky) requirements.

Curiously, JAFO




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Author: jgiglio Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47983 of 121572
Subject: Re: My financial boat to freedom sank, help!! Date: 3/8/2001 9:10 PM
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I recommend you cross post this to Financial Scams, where TMFJay and the scam crew can dissect it. What you invested in sounds very much like a scam.

1. Were you provided a prospectus?
2. Was the underwriter a major broker/bank/something you heard of before?
3. Was it offshore?
4. Did it involve commissions given to people that recruited new investors?


Any of the above are kind of red flags that tip you that it might be a scam, and you might be entitled to some legal remedy.

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Author: EGUSC Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47999 of 121572
Subject: Re: My financial boat to freedom sank, help!! Date: 3/9/2001 12:45 AM
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In certain circumstances you can abandon a partnership interest and get an ordinary loss, if it is worth the money see a CPA who can advice you if you can take advantage of the specific conditions.

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Author: KMyles Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48038 of 121572
Subject: Re: My financial boat to freedom sank, help!! Date: 3/9/2001 5:58 PM
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I guess my explanation of the situation wasn't totally clear. They were company stock options. The CEO of the financial club was good friends with the CEO of the company that offered the stock options. He allowed a certain number of options to be sold by the financial club. So am I allowed to write this off as worthless stock? And if so, how much of it?

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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: 48039 of 121572
Subject: Re: My financial boat to freedom sank, help!! Date: 3/9/2001 6:06 PM
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I'm no expert here, but if the financial club was established as a partnership, I don't think you can do anything until the partnership decides what to do and reports it to you on a K-1.

Ira

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48040 of 121572
Subject: Re: My financial boat to freedom sank, help!! Date: 3/9/2001 6:12 PM
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KMyles: "I guess my explanation of the situation wasn't totally clear. They were company stock options. The CEO of the financial club was good friends with the CEO of the company that offered the stock options. He allowed a certain number of options to be sold by the financial club. So am I allowed to write this off as worthless stock? And if so, how much of it?"

Now I am even more confused (and I still cannot answer your question). Did you buy stock or did you buy options? And why should that make a difference? I believe that options are also similarly regulated. Selling unregistered stock (or options), unless falling into one of the exceptions for private sales, still seems very problematic to me. I would pursue this angle.

Also, I know little about investment clubs, but I assume that the tax treatment for individuals may well differ depending upon how the clubs are structured. Hearing "CEO of the financial club" makes me thing corporation or LLC. Did you own the (now failed) investments or did the financial club?

It seems that there should be a method for writing off a real investment loss, but you may better served by seeking personalized advice from someone to whom you can explain the entire situation; the limited information available to the board makes me (and I suspect others) reluctant to even hazard a guess.

Just my $0.02. Regards, JAFO


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