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This questions starts with "How to" but I will accept any answer as "if I should or not".

My question is related to a business that I have been running this year. I have not been very successful at it, and I have loss the money I have invested in it. I had no income from this business. So my question is, if I am able to deduct this loss on my personal income tax. Trying to apply the same logic of realized loss on the stock market.

Is this possible?

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There are a lot of maybes to do with this. If the amount is significant then I would consult with an accountant in your area. The costs for an hour of their time are trivial compared to the cost of an audit if you do something improperly. You could be entitled to deductions but by claiming them improperly end up owing thousands in fees and forfeiting your deductions. –  user4127 Nov 14 '11 at 14:21

1 Answer 1

I'm not an accountant, and you should probably get the advice of one to be sure about what to do. However, if the business is a sole-proprietorship, you'd complete a Schedule C for the business, and you'd end up with a loss at the end. If the investment you made in the business is considered to be entirely or partially "at risk" per the IRS definition, you'd get to claim all or part of the loss as a reduction in your income. If the business was an LLC, then you're beyond my already limited knowledge.

There may be some other considerations based on whether this was really a business vs a hobby, and whether or not you're going to try to continue with the business, or whether you've shut it down. I'm not sure about those parts, but they'd be worth exploring with an accountant.

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