Stock sale recognition for a bankrupt company

[DomG28]

I purchased stock in a company in early 2020 that went bankrupt later in 2020.  The bankrupt company reorganized and came out of bankruptcy in 2021 and took the remaining worth of my  shares and purchased stock and warrants in the re-organized company in 2021.  In 2022 I sold those shares and warrants and now my 2022 1099B is showing I have a short term gain based on the purchase of the re-organized stock and warrants and the gain from the subsequent sale.  It was over 2 years from when I exercised the initial stock purchase  in which went bankrupt to the time I sold the re-organized stock and warrants.  How is this considered to be a short term gain?

[MaryK4]

The holding period starts at the date of purchase of the re-organized company.  Unlike a stock split, you can use the tracing to determine the holding period.

[DomG28]

Thank you.  Can you confirm if the loss on the original purchased stock in 2020 whose remaining value was used to acquire shares in the re-organized company and its warrants in 2021 should have been recorded on my 2021 tax return?

[DianeW777]

No, it should not have been reported on your 2021 tax return because the company reorganized and provided you with the stocks and warrants.

• If a transaction qualifies as a 'reorganization,' it is generally tax free both to the shareholders and to the corporation. This means you would not report the exchange after the reorganization in 2021.

Your holding period should begin on the day you actually purchased the stock.  Change the acquired date when you enter your transaction in TurboTax which will show and report the correct holding period for capital gain treatment, assuming there is a gain.