- quote -

If the corporation was dissolved in 2003, you cannot deduct
the debt or stock as a loss in 2004. The loss must be
recognized in the year of complete worthlessness.

- quote -

The loss should be deducted in the year that a reasonable
person in similar circumstances would have realized the fact
the stock was worthless.

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"Frank" <my2004taxes[at]yahoo.com> wrote:

- quote -

With the caveat that I'd need lots more info - you can
likely deduct the loans as non-business bad debts. These
get treated as short term capital losses and your deductions
are limited to no more than $3,000 for losses in excess of
gains in any particular year.

FYI - had you treated the money you put into the corporation
as original issue stock purchases you might have qualified
the total loss as an ordinary loss under IRC 1244. In which
case you could potentially write off as much as $100K in one
year, which could create a NOL that you could carry forward
or back to get some additional tax benefit - rather than
just using it up $3K at a time. This is one of those things
that you get from working with knowledgeable tax
professionals.

Gene E. Utterback, EA

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Background: I founded a non-public California "C"
corporation in 1999 that I dissolved in 2003 without the "C"
corporation ever repaying the personal loans I made to it.
I also purchased stock in the same non-public corporation
that is also now worthless.

Question: In 2004, can I in any way deduct the complete-loss
personal loans I made to the C Corp on my personal income
tax return? If so, how?

Question: In 2004, can I deduct the amount I paid for the
stock in the "C" Corp. as a loss? If so, how? The "C" Corp
never went public, and I was the major shareholder.

Question: Also, if I owned stock in another corporation that
never went public that similarly was eventually dissolved (a
dot-gone), but I do not know what year it officially
dissolved, can I write off that loss in 2004 even if the
actual loss occurred in 2001? I cannot find anyone who
knows when the company went bankrupt, and I only found out
in 2003 that the company no longer existed. However, I
still have a stock certificate that is now worthless, and so
it would be nice to write off that loss in 2004, if
possible.

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