How to claim suspended passive losses without a taxable disposition

[RWG1950]

Customer has been receiving a K-1 each year on a small passive investment made (in a hair salon) many years earlier.
Thru 2024, this investment had suspended losses of $1,835 and a remaining cost basis of $2,043.
I'm told this business ceased operations on or about January of 2025 and no 2025 K-1 was provided to my customer.
Can the taxpayer claim these losses without having made a taxable disposition and is there a specific form needed to show this ?
If so, is the suspended loss claimed on "E" and the basis recovered as a capital loss on "D" ?
Thanks for replies.

[New York Enrolled Agent]

Can the taxpayer claim these losses without having made a taxable disposition and is there a specific form needed to show this ?

IRC 469((g) appears to say NO

Get a final K-1. If not available, tell the taxpayer your hands are tied.

[terryats]

I would put his original cost on schedule D as a worthless security. If IRS questions it (which I doubt) I'm sure his broker could help him with proof the investment was worthless

[RAG1775]

I also agree with a position of taking a worthless interest deduction on Sch D. However, you need to make sure that you have sufficient support for the year in which this is taken. Take a look at the Fifth Circuit Echols case for determination of worthlessness.

Also take a look at CCA 201415002. While the facts may be somewhat different, although we don't know this for sure, nothing has changed in the regulations since this decision. In the discussion, the CCA states:
"it is generally understood that Congress did not intend Section 469 to be a permanent loss disallowance provision. Rather, taxpayers should be able to deduct net losses from a passive activity at a time when the ultimate economic gains and losses derived from a passive activity are finally ascertainable."

Taking this later position may be more aggressive, and probably not worth the risk given the tax rate differential for the small amount of dollars in the facts.

A couple of options to consider.