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Subject:  Re: ch. 11 and tax loss Date:  10/8/2001  11:09 AM
Author:  irasmilo Number:  54459 of 132160

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.



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