Hello...I have a new client who received a K-1 showing a net unrecognized 704(c) loss and it's a sizeable loss of over $750,000. I did a bit of research, but everything I am finding refers to the new required reporting on the K-1. I am making a huge assumption here that "unrecognized" means the same here as with regular unrecognized capital losses...no reporting on 1040 until loss is recognized. Is this a correct assumption?
Second question: client says this investment is worthless. They have not been able to produce any documentation saying it is worthless, but if they do, does that change the tax treatment noted above? How so?
Thanks in advance for your help!