Whether your securities are worthless is a question of fact. The burden is on the taxpayer to prove the securities are worthless. If possible, you might consider selling the securities for whatever price you can get because once sold, then you have a more definitive way of proving a capital loss. However, if you feel you can prove the securities are worthless, here is an FAQ from the IRS on this issue.
Question
I own stock that became worthless last year. Is this a bad debt? How do I report my loss?
Answer
If you own securities, including stocks, and they become totally worthless, you have a capital loss but not a deduction for bad debt. Worthless securities also include securities that you abandon. To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it.
- Treat worthless securities as though they were capital assets sold or exchanged on the last day of the tax year.
- You must determine the holding period to determine if the capital loss is short term (one year or less) or long term (more than one year).
- Report worthless securities on Part I or Part II of Form 8949, and use appropriate code for worthless security deduction in the applicable column of Form 8949.
IRS and a Worthless Security
@KkeeNJ
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
