Realizing tax losses on angel investment

Typical example of shielding capital gains by realizing tax losses on angel investment.

  • You invested $250,001 in CoolCo’s Series A Preferred angel round. The Company raised other funds through venture capital equity and debt, and you did not participate.
  • Six years later, CoolCo is still alive, but barely breaking even.  It has a lot of debt. You believe it will be several more years, if ever, before the Company has a liquidity event.  Even then, your returns are likely to be disappointing because the Company has issued so many additional shares in the past six years.
  • Fortunately, you have $300,000 in gains this year from your $100,000 angel investment in HotCo.
  • To shield your HotCo gains, you sell your CoolCo stock to CapGain Solutions for $1.00.
  • You have now realized tax losses of $250,000 to apply against your $300,000 in HotCo gains.
  • CapGain Solutions gives you the information you need to document your CoolCo losses in the current year and shield most of your your gains in HotCo.
  • You realize your tax losses on angel investments to shield your capital gains on a profitable investment. Depending on your situation, you might be able to offset both capital gains and ordinary income through Section 1244 private company losses

Tell us your unique scenario. We’ll do our best to help you shield your gains!