Message Font: Serif | Sans-Serif
No. of Recommendations: 1
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."

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.