Does "All of my investment in this activity is at risk" apply for $0 cash + property?

I worked for an LLC last year that didn't generate any revenue. We took investments in exchange for equity, and the total loss amounts to about $10k for me and my partner each. We didn't put any cash in, but
used each of our cars and computers, for a total fair market value of $3k each.
I'm filing my taxes with TurboTax and if I check the Schedule K-1 box that says "All of my investment in this activity is at risk", I get a hike in the federal refund amount of almost $2k. But I'm not clear whether I qualify, given that I didn't have a cash or loan investment.
Should I check that box or not? And what amount should I enter in Box 14-A, Net Earnings (Loss) From Self-Employment?
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Your investment is at risk to the extent you will actually incur the loss if there is one. An investment is not at risk, for example, if you borrowed money that you don't have to pay back if the thing you bought with the money doesn't pay.
___ Stu http://DownToEarthLawyer.com
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wrote:

That makes sense. What happens though if we haven't invested any cash, but exchanged equity for cash and used our personal cars and computers in the business? We owned these before, so if the LLC fails, we'll still keep these assets.
Another aspect: http://www.mmmlaw.com/media-room/publications/articles/federal-income-taxation-of-llc-members says that "A member's share of LLC profits will increase its amount at- risk."
I take it that "profits" here means "profits and losses" (otherwise, this sentence doesn't make sense in the context of at-risk losses).
If I have a 20% share in the LLC, and the LLC made a negative profit (loss) of (minus) $50k, does that increase my amount a risk by $10k?
Is then my total at-risk amount $10k + $3k (the FMV of car+laptop)?
Do the car+laptop somehow have to be on the books? (Or how do I prove these were used in the business?)
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On Friday, April 20, 2012 11:45:45 AM UTC-7, Matt Arnolds wrote:

How did the LLC pay bills? It looks like the LLC had a loss, which means bills were paid, which means the LLC had cash. What does "exchange equity for cash" mean?
Your computers and cars are depreciating in value, so it is OK to take a loss for depreciation on these items.
The key is did you actively participate in the LLC.
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On Apr 20, 12:12 pm, " snipped-for-privacy@yahoo.com" <removeps-

We took investments in the form of cash into our bank account, for which we gave the investors equity.

Even if they weren't on the LLC's books, but were our personal property all along?

As in, work my ass off since its inception? Yes.
wrote:

We haven't transferred those assets to anyone, formally. I just used my car every (other) day to drive the team to business meetings, networking events and the like. And of course, we used our computers to conduct business.
So technically the cars+laptops were at risk if we transferred them in exchange for stock, but we haven't done that. Are these assets still at risk?
Re. "A member's share of LLC profits will increase its amount at- risk." :

Thanks, that's good to know.

As described above (driving to business meetings, conducting business via email/Internet).

Okay, we haven't done that.

So the car+laptops are still "at risk" even if they remained our personal property?
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It isn't the car that's at risk, but the $5,000 (or however much) worth of mileage you put on it on behalf of the company.
Seth
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If you transferred those assets to a corporation or LLC in exchange for stock/ownership, and the company goes broke, actually the creditors of your company have priority to get those assets over you as shareholders. So technically I would say they are at risk as well. If the creditors don't go after your cars, computers, etc., well, that's their fault.

I don't know what they are referring to. Hopefully someone else here will.

I doubt it. I suspect the quote means that a member's share of profits actually received in any year increases the amount at risk, because that is money that should actually be distributed to the members.

How do you plan to use them in the business? If you want to exchange them for stock/membership shares, then they need to be on the books. Otherwise they remain your personal property, and increase your amount at risk to the extent of their value when contributed to the company.
___ Stu http://DownToEarthLawyer.com
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