Can I write off a business investment loss

I invested $100,000 four years ago with a company I worked for and received a Schedule K-1 every year with losses. Last year, they bought me out for $2,000, and I received a final K-1. Can I write off the $100,000 minus the losses and payment on my tax return?

Yes, you can. I assume that you were able to deduct the losses because you worked there. But if it was a company that you used to work for, then you would have a passive loss carryover. As this was the year of disposal, you now would be able to deduct all of those passive losses. In any event, you should look at your K-1’s ending balance for the prior year. That should reflect your basis, which would be the initial $100,000 that was invested less all of the losses previously deducted. Your current-year loss on the sale of your partnership interest would be that K-1 balance adjusted by any current-year loss and the $2,000 paid for your interest.

Rob Seltzer is principal of Robert Seltzer, CPA, PFS, in Beverly Hills. You can reach him at (310) 278-9944.

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