Lets say an investor purchases 10 shares of company XYZ at $50. Over the span of one year, the stock falls to $1. The company then conducts a 30 to 1 reverse split. The net result in this account is that the 10 shares will be removed; however, $10 is deposited in the account to compensate for the value of the shares.Question: Is this investor able to claim a tax loss? The investor does not have any shares to sell so how would he claim one? Thanks in advance.
Do some further checking with an expert, but it appears to me that since the investor was given cash in lieu of receiving a partial share, in effect his shares *were* sold. So, he'd treat it as a $40 loss (that is, if you meant he purchased 10 shares at $5 each for a total price of $50; if he purchased 10 shares at $50 each for a total of $500, it'd be a $490 loss).
RiverCityFool is right - the $10 is a cash-in-lieu payment for a fractional share. It is a sale from an IRS viewpoint, and goes on Schedule D - in this case, as a capital loss.Lorenzo
RiverCityFool is right - the $10 is a cash-in-lieu payment for a fractional share. It is a sale from an IRS viewpoint, and goes on Schedule D - in this case, as a capital loss.Great, thanks for the quick response both of you. I still need to check that it works this way in Canada too, but I wouldn't expect it to be any different.
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