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Author: cashmoney69 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Company went bankrupt.What do I do w/the stock?? Date: 2/8/2001 12:06 PM
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I bought shares in a company recently and then they went bankrupt. Talk about bad luck! I lost b/t $750 & $800.00. What do I do about this concerning my taxes? I am single and my standard deduction is still far greater that my stock loss. Does this even matter? I have not filed yet and was just wondering what I should do. Any help would be greatly appreciated.

Thanks,

Gary
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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45969 of 121061
Subject: Re: Company went bankrupt.What do I do w/the sto Date: 2/8/2001 12:56 PM
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Your stock loss is independent of your standard deduction and ultimately will be reported on Schedule D. Unfortunately, you can't report it until you sell the stock or it becomes worthless. Worthless in a tax sense means that there is absolutely no chance that the shares will ever have any value, ie., the company has closed its doors and liquidated all its assets and the creditors are still owed money.

This is not the same as the company declaring bankruptcy. Many companies' stocks still trade while they are bankrupt (even if only for pennies a share). And often, the companies reorganize and emerge from bankruptcy. Sometimes the stock resumes trading, sometimes it is declared worthless. If you want to guarantee being able to take the loss on your 2001 taxes (next year), you need to sell the shares this year. Many brokers will agree to buy shares like this for $1 (total, not per share).

If you think that there is a chance that the stock may someday recover some value, an alternative is to sell the shares to certain family members. IIRC, you can't sell to direct ancestors, descendents, spouse or siblings -- but, in-laws, aunts/uncles, cousins, nieces/nephews are ok. (Hopefully, someone else will chime in if my memory is faulty.) Then if the stock recovers, you've kept the gain "in the family."

Ira

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