Here's the story.

I invested into an existing business in 2011 in return for a particular percentage of business income. My relationship with the owner/partner went south after only 4 months and for whatever reasons we came to agreement that I sell back my stake to the owner/partner for exactly what I paid for it originally. Partner didn't have the money so we came to a re-payment agreement for the course of 2 years. I only collected about 25% of what ex-partner owes me in 2011.

1. Can I deduct all my portion of business expenses while I was at the business from my tax return?

2. Since I didn't make any money selling back my shares to my ex-partner, and in fact made a loss overall considering my business expenses while I was at the business PLUS the fact that I have only received 25% of what I was owed so for in 2011... DO I OWE TAXES TO UNCLE SAM ON THE SALE OF MY SHARES BACK TO MY PARTNER?

Please note, the business is files as an S corp in my ex-partners name. The partnership agreement was drafted by ourselves, as well as the exit agreement, and the re-payment agreement.

Any help is appreciated. Thank you for your time.

1) That depends on the partnership agreement. Normally, such expenses are reimbursed by the partnership.

2) No, because your effective receipt was only 25% of the original price. You never recovered ALL of your original investment, and THAT loss can be reflected on Schedule D.

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