A couple of years ago I invested 50k into a bad real estate investment. The person heading up this llc actually committed fraud and was sentenced to 10 years in prison. I am looking to write off this investment for the year 2008 and have had conflicting reports on what I can write off. Does anyone know what you can write off on a bad real estate investment?
How much can I write off on a bad real estate investment?
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Apr
erikdjs
April 1, 2010 at 7:15 pm
Yahoo answers is probably the wrong place for your question. It’s too important.
If you really want to find your answer online try http://www.justanswer.com. This is a pay per question site where the questions are answered by verified industry professionals.
Once you have an idea of what you should do, I’d suggest confirming it with your local tax agent.
I Buy And Sell Houses
April 1, 2010 at 7:20 pm
Only an accountant can answer that question accurately. I’m not an accountant, so take this advice for what it’s worth.
You can write the loss off in the year that you took/had to take the loss.
For example, if you’d bought stock at $20 a share and over a few years it declined to $5 a share, and you sold it at that price, your loss would occur in the year you sold the stock.
With real estate, if you buy a property for $100,000 and 3 years later sell it for $50,000, you incurred a $50,000 loss in the year you sold it.
I was involved in a situation remarkably similar to yours. Luckily, for me it was only $15,000. Again, check with an accountant. But, in your case, it would be the year that your $50,000 became valueless. Clearly, there can be some gray area–is it the year a court judged the activity to be a fraud? Or, for instance, a year earlier if the LLC declared bankruptcy? An accountant should advise you on this. If, technically, it’s too late to take the writeoff for 2008, you can file an amended return for a previous year.
Hope that helps.
Pagan Dan
April 1, 2010 at 7:57 pm
If you bought the real property as an investment you can write it off. If you bought the place to live in it, or if you did live in to avoid capital gains tax, you’re out of luck.