Possibly — but a SAFE is the hardest instrument to attach a loss to, because nothing about it ever happens on its own. Stock can be declared worthless when the company dissolves. A note can go into default when it isn't repaid at maturity. A SAFE has no maturity, no default, and no conversion until the company does something. If the company simply stops, the SAFE just sits there, unchanged, with no event to point to. This page explains why that matters and what your options are.
What a SAFE actually is
A Simple Agreement for Future Equity is a promise: if the company later raises a priced round, is acquired, or dissolves, your investment turns into shares or a payout on the terms in the agreement. Until one of those happens, you hold neither stock nor debt. You hold the promise.
For a company that goes on to raise a round, that's fine — the SAFE converts, you get shares, and from then on you have an ordinary stock position. For a company that goes quiet without ever raising again, the SAFE never converts. Years later you still hold the same piece of paper, and it still says exactly what it said the day you signed it.
Why that's a tax problem
A loss on a return needs an event and a year. The two usual ways to get one are showing that the position became worthless at an identifiable point, or disposing of it.
The worthlessness path struggles with a SAFE on two fronts. First, the worthless-security rule in §165 applies to "securities" as the tax code defines them — stock, stock rights, and certain debt — and whether a SAFE is one of those isn't settled. Depending on how your advisor characterizes it, the loss may fall under a different rule with different requirements. Second, even if the rule applies, you still have to show total worthlessness in a specific year, and a SAFE issued by a company that just went silent gives you nothing to point to. The company hasn't dissolved. The SAFE hasn't expired. It's the same document it always was.
The characterization question also affects what kind of loss you'd have if one is allowed — capital, or something else — and whether the ordinary-loss treatment some small-business stock gets under §1244 could apply, since that provision is about stock. All of that is your advisor's analysis.
The sale path
A sale doesn't depend on any of that. It's a dated transfer of the SAFE — the contract right — to a buyer for consideration under an executed agreement. You aren't claiming the SAFE is worthless or arguing about what kind of instrument it is; you're reporting that you sold it, for what, and when. The characterization question still matters for how the loss is treated, but the event and the year are no longer in dispute.
Two things to check in the SAFE itself before a sale: whether it restricts transfer or requires the company's consent, and whether the company is even reachable to give it. Standard SAFEs generally permit assignment with consent that can't be unreasonably withheld, but the wording varies and your agreement governs.
DivestMe, LLC buys unconverted SAFEs. It's an independent, unrelated party; it purchases the SAFE for $1.00 under a counter-signed Asset Sale Agreement, creating a dated disposition; and you pay a flat $150 fee per position for the documentation. DivestMe documents the sale and does not determine eligibility — whether the loss is allowed, in what year, and in what character remains your advisor's call.
What your advisor will need either way
Gather these before the conversation; they’re the same for both paths:
- What you bought, and from whom: stock, preferred, SAFE, note, LLC or LP interest.
- Cost basis — what you actually paid, plus any later contributions.
- Acquisition date, and the subscription or SAFE document itself.
- Every communication from the company since, including the last one.
- Any K-1 or 1099 ever received, and the last year one arrived.
- Whether the stock might be §1244 small-business stock (possible ordinary-loss treatment, subject to limits your advisor will check).
Add to that list, for a SAFE: the signed SAFE itself (post-money or pre-money, valuation cap and discount), the platform confirmation if you bought through one, and any later financing the company announced, since a priced round you didn't hear about may have converted the SAFE without your knowing.
Timing
A sale counts for the year it closes. A disposition executed on December 31 belongs to that year; one executed on January 1 belongs to the next. If you and your advisor decide a sale is the right path and you want the loss in the current year, the paperwork has to be complete before year-end — not started.
If you think the position may have gone worthless in a prior year, raise that with your advisor before doing anything else. That’s a separate question with its own answer.