How to advance money to a start up for tax purposes?

kruzo: How to advance money to a start up for tax purposes?
I am about to advance some money to a startup company (a Massachusetts LLC) to cover their startup costs. What do I need to do to make this money deductable on my personal income tax, particularly if that company ends up failing? How do I formally “give” this money to them and how do I write them off on my own 1040?

Answers and Views:

Answer by Jss
Start up costs are not deductible. They must be amortized.

Answer by LitlGrlBigVoice
If you have not already secured your cash advance, you may want to look into government grants…basically free money that you do not have to pay back.

Answer by Wayne Z
Investing in a company (debt or equity) is not deductible. It is an asset that you hold similarly to buying stock or bonds in a publicly traded company.

IF the business venture fails, and you have exhausted all of your collection efforts, you can write off the loss of principal in the investment as a Capital Loss subject to normal capital loss limitations.

Get something in writing such as a promissory note.

Answer by Judy
It isn’t deductible. Depending on how the advance of the money is structured, if they fail you might be able to take a deduction for the amount of your loss. That won’t give you the whole amount back, only a small % of it on your taxes.