Equity on the books after the property sale, can I deduct this?

[Pierce Lovesee]

Hello,

We sold some properties in Oklahoma in 2019 at a loss. The properties were held under a single member LLC. After the transactions were complete, since the properties were sold at a loss and a positive net operating income was not realized in any year the properties were owned, the Opening Balance Equity still had a positive balance on the Balance Sheet, and there is still a positive Total Equity. Since this is the money invested into the company by the member of the single member LLC, and the loss is now realized since the company assets have been sold, is this loss a tax deduction? If so, what tax form should this loss be accounted for on? I appreciate the help!
 

[Michael Plaks]

@Pierce Lovesee

The Balance Sheet equity items, whether correct or not, do not create a loss.

You likely have a loss from the sale itself. For example, if it was a rental bought for $100k, depreciated $10k of it and sold for $85k, you have a $5k loss. If you had regular operating losses for the previous years, including depreciation, and they were blocked by high income, they are released at sale for an additional loss.

How to properly record all of it in the books is another conversation.

Besides, if it's a single-member LLC and is disregarded for tax purposes, all transactions between the owner and the LLC have zero tax impact.