Is this counted as taxable gain or deductible loss? What form do I fill out to IRS? (See the details)?

Question

I started a small business with $200K as a partnership, changed to a C corporation with a different person, and received $110K as a buyout when I got out of that corporation. So in long term, I lost about $90,000 and I want to find a way to file this loss if it is deductible. Tax year is 2005 and I could not file this in time since I did not have enough information about how to file as of now.
Clarification: I was the original owner who owned 50 percent or more of that corporation, and when I gave the corporation control to the other partner, no change in the business site has been made.

Answer 1

You are going to have to find a CPA for this one.

Figuring out capital gains/losses is a complicated business that will involve the profits/losses from previous years you ran the company and then you will get to factor in things such as goodwill, ownership splits, assets owned & disposed of and a host of things that this space will not be able to cover.

Do yourself a favor and go consult with an expert, that is your best bet.

Answer 2

there is nowhere near enough information to give you an answer. You need to see a CPA or Enrolled Agent.

If, for argument's sake, we take the $200K as the basis in the partnership and there are no other adjustments to basis, then you do, indeed, have a $90K loss. So far so good. The problem is, you are looking at a deduction against regular income of $3,000 per year until it is used up. If you have gains in the future, though, the loss can be set against those in full.

Answer 3

I know I'm not gonna get "Best Answer" on this one, I'm being too harsh.

You ask these sorts of questions BEFORE you take the action, not AFTER.

If you had asked these questions to your CPA (or EA) BEFORE you engaged in these transactions, you might have been able to engineer a few minor tweeks and make the whole mess more tax-efficient - which reduces your overall loss. By waiting until AFTER, you've cut your accountant off at the knees. S/he can only stanch the flow, not prevent the cut.

Before. After. Very small words. Very costly lesson.