Hello,

I recently sold my 50% interest in a small retail business for a loss compared to the cash I put into the business. I was told I could have claimed the loss on my tax return for a write off. Is this true?

Following is a brief summary of my situation:

1. In 2007, I put in $75,000 cash to start up the business and my 50% partner also put in $75,000.

2. During 2007, 2008 and 2009 both my partner and I put in about an additional $20,000 each to keep the business afloat during this tough economic climate putting our cash into the business at approximately $95,000 each.

3. From 2007 thru 2009 I wrote off approximately $40,000 in ordinary business losses from K1’s Form 1065 on my personal income tax filings.

4. In 2009 I sold my 50% interest for $20,000 cash to my partner, which was documented as a partner distribution on the company’s 2009 Form 1065, which reflected my ending capital at 0%.

Can I claim the actual cash loss of $75,000 ($95,000 cash infusion less the $20,000 cash buyout) from the sale of my 50% ownership of the business? Or is the amount I can claim less, since I did have the benefit of operating losses in 2007, 2008 and 2009 when I was still a partner in the business?

If I can claim this loss, how do I file for this loss? What form do I use to file the loss? Do I need to make an amendment to my 2009 tax return, since this sale took place in 2009?

Is there a deadline to file amendments to a 2009 tax return? Can the loss be filed on my 2010 return instead that I will be filing any day now?

If I have to amend my 2009 return, how does that affect my 2010 return that is about to be filed? I am assuming there will be some sort of “Loss” carry forward. Will I also have to amend 2010’s return as well if I don’t take care of the 2009 amendment before filing my 2010 return?

Your guidance is greatly appreciated.
Thanks!
JC