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Filing564
Level 2

Stock losses due to company went into bankruptcy a year ago, can i still deduct that loss from my taxable income

I lost money I invested in stock as the company in which I invested went into Bankruptcy in 2019. My question is :
(a) can I declare the loss in my tax return for 2020 as I did not declare that loss in my tax return filing for year 2019 ? 

As fidelity tax form 1099 apparently does not show that loss on my tax forms neither for 2019, nor for 2020 , but it shows that loss in fidelity year end statement of 2019.

 

I did not declare this loss in 2019 filing as i thought i will show up in 2020 but it again did not show up in 2020 1099 form.
Please help with the answer. Thank you

 

 

 

https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/stock-losses-due-to-b...

1 Best answer

Accepted Solutions
Opus 17
Level 15

Stock losses due to company went into bankruptcy a year ago, can i still deduct that loss from my taxable income

If the loss occurred in 2019, it has to be claimed on your 2019 return.

 

A loss is only claimed when it is "realized" or made real.  This may be tricky to figure out.  For example, if the stock is worth 1 cent per share, that's not "realized" until someone buys it from you at 1 cent per share.  Often, a broker will do that for you so you can realize your loss.

 

However, it should show as a sale on a form 1099-B.  Fidelity handles a lot of 401(k) and IRA accounts -- did this loss occur in a qualified retirement account?  If so, you can never declare the loss.  The whole point of a qualified retirement account is that whatever happens inside the account in between making a contribution and making a withdrawal has no tax consequences.  Your "loss" is the fact that you have less money to withdraw when you retire and so you pay less tax on those withdrawals.

 

If this was a regular account, you may need to call your broker to determine whether the loss has been realized yet and why it wasn't reported. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

View solution in original post

4 Replies
Opus 17
Level 15

Stock losses due to company went into bankruptcy a year ago, can i still deduct that loss from my taxable income

If the loss occurred in 2019, it has to be claimed on your 2019 return.

 

A loss is only claimed when it is "realized" or made real.  This may be tricky to figure out.  For example, if the stock is worth 1 cent per share, that's not "realized" until someone buys it from you at 1 cent per share.  Often, a broker will do that for you so you can realize your loss.

 

However, it should show as a sale on a form 1099-B.  Fidelity handles a lot of 401(k) and IRA accounts -- did this loss occur in a qualified retirement account?  If so, you can never declare the loss.  The whole point of a qualified retirement account is that whatever happens inside the account in between making a contribution and making a withdrawal has no tax consequences.  Your "loss" is the fact that you have less money to withdraw when you retire and so you pay less tax on those withdrawals.

 

If this was a regular account, you may need to call your broker to determine whether the loss has been realized yet and why it wasn't reported. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Filing564
Level 2

Stock losses due to company went into bankruptcy a year ago, can i still deduct that loss from my taxable income

Thanks Champ for your response. 
The loss occurred on regular Trading account on Fidelity Platform. I did call fidelity last year for this as it did not show up on my 1099 form they said, you can just declare it with the statement showing it is loss. No one really answered it on their side.

One person on call from fidelity said, you can declare it anytime in next few years as I presumed since all this was happening in Feb 2020, (presumably that is when broker bought that loss from me as Champ explained), so now this loss will show up on my 2020 taxable 1099 form, hence i did not declare it on 2019 returns hoping will be easier to do in 2020 return, but again loss does not show up on 2020 1099 form ...

Opus 17
Level 15

Stock losses due to company went into bankruptcy a year ago, can i still deduct that loss from my taxable income


@Filing564 wrote:

Thanks Champ for your response. 
The loss occurred on regular Trading account on Fidelity Platform. I did call fidelity last year for this as it did not show up on my 1099 form they said, you can just declare it with the statement showing it is loss. No one really answered it on their side.

One person on call from fidelity said, you can declare it anytime in next few years as I presumed since all this was happening in Feb 2020, (presumably that is when broker bought that loss from me as Champ explained), so now this loss will show up on my 2020 taxable 1099 form, hence i did not declare it on 2019 returns hoping will be easier to do in 2020 return, but again loss does not show up on 2020 1099 form ...


I guess I still have to know when the loss was actually realized.  If you have a stock on your statement showing a purchase price of $100 and a current value of 5 cents, that certainly a loss but it hasn't been realized until you sell the shares.  If the shares were declared worthless in 2019 and taken out of your account by the broker, then your loss was realized in 2019 and you have to amend your 2019 return to claim it. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Filing564
Level 2

Stock losses due to company went into bankruptcy a year ago, can i still deduct that loss from my taxable income

Thanks Champ, for being so helpful. Appreciate it.

final resolution, based on your answer I rechecked my 1099 form. Fidelity did include the losses in 2020 1099 form as you mentioned they realized this loss in Feb 2020 and hence added it in my year end tax statement as loss. This is solved.

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