Sch E Royalties loss

A client invested in an oil company (LLC), she got K1 every year. Income in K1 was in line 7 Royalties.

Now the company was bankrupted and the client suffered a big loss ( 100K+). my question is how to report this loss? shall it be reported SCh D as a long-term capital loss? I assume it was not qualified for section 1202 small business stock, correct?

Thanks for the help

Usually you will get a final K-1. Trustee, appointed, handles the liquidation (they usually have it last longer than you want). If someone would guess what type of loss it is without information-I would guess ordinary. Funds either used up in the operations or someone ran off with them. That is the guess, it would be much better to find out what and why.

thanks , Jon,

the client worried they won't get final k1. as the LLC owner has been arrested for financial fraudulence crimes

This may end being a casualty or theft loss, no longer deductible(except to offset casualty or theft gains) with TCJA.
Also possibly an investment loss if TP can establish the investment is worthless. Bankruptcy per se is not proof of worthlessness.

Casualty and theft losses for income producing property are still deductible on Schedule A after TCJA. Not sure if this would qualify, but might be worth looking into.