Company I had stocks in went bankrupt but restructured

Guarrman · ‎April 10, 2021

I was heavily invested in DNR when they went into Chapter 11 last year. The nullified their common stocks. (-54,000 shares) Then they replaced them with 140 warrents for the restructured DEN (DNRRW).

Do I get to write off that loss? Then if I sell my warrents, then claim those as gains?

or

Do I have to sell the warrents to declare the loss?

Either way, I havn't gotten anything denoting the loss, it is only marked on my investment returns as a "non; reportable action"

How do I file that?

DianeW777 · ‎April 11, 2021

A capital loss occurs when you completely dispose of any stock you previously purchased. Until you dispose of the stock you originally invested in there will not be a tax loss.

A stock warrant gives holders the option to buy company stock at the exercise price until the expiration date and receive newly issued stock from the company.

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Guarrman · ‎April 11, 2021

So if I get this right, when they disolved my shares, that does count as disposing of my shares, thus I should write off my purchase price, as the warrents aren't the stocks, they are just a chance to buy back in at a later point?

DianeW777 · ‎April 12, 2021

It depends. If you have a document that clearly states your stock shares are worthless, then you can deduct your capital loss.

You can report them in the year they are deemed to be completely worthless. This usually happens when a company stops doing business or files bankruptcy. You should be prepared with your proof and retain it in your tax file.

The sales price would be zero and the cost basis would by what you actually paid for the stock. You should use the description as 'Worthless ABC 5Sh' (example).

To enter worthless stock as investment sales:

Open (continue) your return in TurboTax.
In the search box, search for investment sales then click the "Jump to" link in the search results.
Answer Yes to the question Did you sell any investments?
- If you land on the Here's the investment sales we have so far screen, click Add More Sales.
Answer No to the 1099-B question.
On the next screen, select the type of sale you had (stock, second home, collectible, land etc.) and click Continue.
Continue following the onscreen instructions to enter the sale.

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Company I had stocks in went bankrupt but restructured

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