My wife has bought bonds to a company that has been bankrupt, can I claim the loss on the bonds as tax deductions?

[FangxiaL]

Please clarify: Did your wife use a brokerage for the purchase of the bonds? If so, did she receive Form 1099-B?

When a company declares bankruptcy, it doesn't make its bonds worthless. Bankruptcy laws govern how a bond issuer goes out of business or attempts to reorganize its finances.

[cs21807]

• She did not use a broker, she bought the bonds straight from the company. She recieved paper from the bankruptcy court stating chapter 7 status of the company, with so many creditor no matter how much the bonds remaining value will be (I dont believe there would be any value left) she would lose a lot of money no matter what, so I did not file our tax yet, cause im not sure if the lost could be deducted.

[JillS56]

Yes, the loss can be deducted.   You would report the loss as worthless security and report it just as you would if you received a 1099-B.  To do this here are some steps to enter stock losses due to bankruptcy of company

1. With your return open, search for worthless stocks in the TurboTax search box.
2. Click the Jump to worthless stocks link in the search results.
3. Answer Yes to the question Did you sell any investments in 2020? 
4. Answer No to the 1099-B question.

5. On the next screen, select the type of sale you had (stock, second home, collectible, land etc.) and click Continue.

6. Continue following the onscreen instructions to enter the sale date of the disposition/bankruptcy/worthless stock, etc.

7. Enter "0" for the sale price and "worthless" in the description.

How to Enter Worthless Stock