Can my LLC carry a loss over to my personal return?

Question

We created an LLC last December. We injected around $60,000 in capital to start the company January 2nd. We have not received any income this year. If we do not receive any income for all of 2008, can this be considered a capital loss and carried over to our personal returns as a loss?? Please let me know and thanks.

Answer 1

Check with an attorney or tax advisor but I don't believe so.  One of the beauties of an LLC is that it is separate from your personal income/tax liability.  Perhaps your share of the LLC as a member could be considered but again, a tax advisor would be able to best answer.

Answer 2

An LLC can be a sole proprietorship, a partnership or a corporation. In your case it appears to be a partnership (we created...). Partnerhip profit or loss is passed on to the partners.

Answer 3

If you intend to carry on the business, the answer is no you cannot write off the amount you contributed to capital. The partners can however, write off any losses up to the 60k and any exculpatory debt that the partners have assumed. You can only write off the 60k when your interest in the LLC is deemed to be worthless. The determination of worthlessness is complicated and is determined by many factors.

But for now, the answer is no you cannot write off the capital contribution amount.  

Answer 4

You can deduct the loss on your personal return up to the amount you have invested (your tax basis). If this LLC is a partnership you have to file Form 1065 US Partnership tax return, if its just yourself you would file Schedule C with your personal return. The loss will not a capital loss (limited to $3,000 per year) but rather an ordinary loss for trade/business which can be used to offset any other income you may have.

Answer 5

LLC is a wild type of animal.

First, if you elect (you have to elect this) to have it considered as a corporation for income tax purposes, you file a 1120 and list the loss on K-1, subject to the usual limitations (you can't lose more than you put in).

Or, if it is a two or more person LLC with no election, the IRS will treat it as a partnership, file 1065, list loss on K-1 as above.

Or, if it is a single person LLC, the IRS will treat it as a disregarded entity. Profit or loss on Sch-C. This doesn't appear to be your case because you are saying "we."

This will change next year!

The IRS has realized that they are being a little bit weird about LLCs, and starting some time next year (watch announcements) will start treating all LLCs as corporations (which, IMO, they should have done in the beginning).

If you are confused, see a good accountant/CPA/attorney that is familiar with LLCs.

Hope this helps.

  

Answer 6

You said LLC but not how you are organized so I will assume it is a partnership.  The partnership entity needs to file its own tax return but in itself is not taxed.  Its profits/losses, deductions and credits are passed onto the owner by in the percentage that each owner owns.  So when you (or hopefully a fully qualified tax professional [a CPA or Enrolled Agent]) does the partnership return, it will generate a Schedule K-1 for each owner to use on his/her personal return.  That K-1 goes on each owner's Schedule E -- that is how you get credit for what goes on in the partnership.

Your $60K is your personal basis in the partnership and not a capital gain or loss.  You will recover it by not having to pay tax on your income when the partnership starts making income.