A worthless stock or investment is entered like a sale of an investment on your tax return in the year it becomes worthless. Follow the steps provided by our Tax Expert @PattiF to enter your capital loss. Keep all of the documentation with your tax files should you need it later.
If you should recover any of your cost/loss in a later tax year use the information below for how to handle it on your tax return for that future year.
Tax benefit rule. IRS Publication 525
You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year.
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