Stock losses due to bankruptcy of company

[erictsanford]

I purchased stock in a company in 2013.  The company went bankrupt in January 2015.  I did not have any capital gains from the sale of any other stock in 2015.  How do I deduct the loss from the bankruptcy?

[HelenaC · Accepted solution]

Enter a worthless stock like any stock sale but with a sales price of zero and the word "worthless" in its description. Enter the correct cost or basis, date acquired, and December 31 as the date sold.

If you did not receive a Form 1099-B, here are the steps to enter your investment sale because it is worthless:

1.      With your return open, search for worthless stocks in the TurboTax search box and then click the Jump to worthless stocks link in the search results.

2.      Answer Yes to the question Did you sell any investments in 2015?

o    If you land on the Here's the investment sales we have so far screen, click Add More Sales.

3.      Answer No to the 1099-B question.

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

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

[akopac37]

How does this work with cryptocurrency, particularly the bankruptcy of Celsius?

[DaveF1006]

If your Cryptocurrency is completely worthless and has no value, you can treat this loss as an abandonment loss under  § 1.165-2 of the tax code. This is considered an ordinary loss versus a capital loss. According to this provision, you need to consider the following to determine if whether or not you qualify to take this loss under Section 165(a) of the tax code.

1. Did you invest with the intention of making a profit?
2. Did the cryptocurrency suddenly stop being valuable?
3. Is it a non depreciable property? (yes: all cryptocurrencies are non-depreciable property)
4. Did you permanently discard the worthless coins? (e.g. for example sending them to a null address?)

According to Cointracker, "If you answer “yes” for all of the above questions, you could treat your loss as an abandonment loss. Make sure you document the answers for these questions along with proof of your ownership of coins prior to abandonment, an intent to abandon the coins and the actions you took to abandon the property (three-prong test set by the tax courts). These records will come in handy in case the IRS questions your deduction.

Abandonment losses are reported on Form 4797, line 10. These losses are considered ordinary losses and not subject to capital loss limitation rules. You can report the loss in the year you incurred the loss, in other words, in the year you ceased ownership of the coins."

@akopac37