You should report the loss on the investment in the year that you are sure it became worthless. Keep any documentation you have supporting the worthlessness of the stock in the case of an audit. See Worthless Security - IRS
Where do I enter a capital gain or loss in TurboTax?
If you own securities, including stocks, and they become totally worthless, you have a capital loss. Worthless securities also include securities that you abandon. To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it.
- Treat worthless securities as though they were capital assets sold or exchanged on the last day of the tax year.
- You must determine the holding period to determine if the capital loss is short term (one year or less) or long term (more than one year).
- Report losses due to worthless securities on Schedule D of Form 1040 and fill out Part I or Part II of Form 8949.
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