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I suppose there's something about this in FAQs, but I'm lazy:

If a company declares ch. 11, at what point in the process can a shareholder claim the stock is worthless and take a tax loss? (This company is now in ch. 11, but final disposition concerning possible buy-out, unlikely refinancing, or conversion to ch. 7 will probably take until after Jan. 1.)

I know one piece of advice is to sell, but that costs a brokerage fee. Also, some investors in this company own it as a Private Placement and can't sell. (Long, depressing story.)

What happens if the ch. 11 process later results in some kind of return, after you've taken a tax loss?

Thanks.
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If a company declares ch. 11, at what point in the process can a shareholder claim the stock is worthless and take a tax loss? (This company is now in ch. 11, but final disposition concerning possible buy-out, unlikely refinancing, or conversion to ch. 7 will probably take until after Jan. 1.)

Based on what you've written, you won't be able to declare it worthless this year. In general, you can't declare the stock worthless until there is no longer any chance of receiving "value" for the stock. If management gets refinancing and declares the existing common stock void; or if the company converts to ch. 7, liquidates, and gives all the proceeds to the creditors; or the company is "bought out" in such a way that the common stock holders receive nothing -- then the stock is worthless. As long as the company remains in Ch. 11 there is still a chance that it can reorganize without wiping out all of the common stock equity.

Sorry.

Ira
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If a company declares ch. 11, at what point in the process can a shareholder claim the stock is worthless and take a tax loss?

You may find this information helpful.

Here are three good explanations about what happens when a company goes bankrupt:

http://www.sec.gov/investor/pubs/bankrupt.htm
http://www.fool.com/foolu/askfoolu/2000/askfoolu000830.htm
http://www.fool.com/ddow/2000/ddow000215.htm

Here are several links to articles about offsetting gains and losses. The first link is to TMF's Tax Center. The other links are specific articles available at the Tax Center.
http://www.fool.com/taxes/taxcenter/taxcenter.htm?ref=PFinAg
http://www.fool.com/school/taxes/2000/taxes000107.htm
http://www.fool.com/taxes/2000/taxes000630.htm

David Jacobs
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Hello Lokicious,

If a company declares ch. 11, at what point in the process can a shareholder claim the stock is worthless and take a tax loss? (This company is now in ch. 11, but final disposition concerning possible buy-out, unlikely refinancing, or conversion to ch. 7 will probably take until after Jan. 1.)


See Roy Lewis artticle on "Worthless Stock".

http://www.fool.com/taxes/2000/taxes000630.htm

If security analysis shows no reasonable expectation of earnings sufficient to provide value to the original stockholder's equity, and the company is insolvent, you warrent the deduction, as of that yearend.

If in doubt, take delivery of certificate, sell to in-laws without commission.

What happens if the ch. 11 process later results in some kind of return, after you've taken a tax loss?

You Have immediate income.


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Thanks all.

Luckily, I never put much on high risk investments. I can't help being furious at Wall Street, which 2 years ago was flingling money (and urging investors to do the same) at dot.coms with no businesses, while now they've undermined the prospects for really promising technologies that just need a funding boost to get them past the recession.
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