Bankrupted company stocks

[SeanBahador]

I bought the stocks of a company in 2022 They announced bankruptcy in 2023. The company liquidated on September 2023. I didn’t sell my stocks. My broker didn’t issue an 1099 B form for this loss. They said the proceeds is Zero so they would issue a 1099B form. I am wondering if I could file this loss in my 2023 tax ? If yes,  How can I file it with TurboTax 2023 without 1099 B form? 

[Mike9241]

The IRS requires that the investment be totally worthless to take a write-off. that's a question of fact. The stock of some bankrupt companies still trade in a specialized market which means IRS does not consider them totally worthless. if it is, add the item to the 1099-B use type f or x  - proceeds and cost not reported to IRS. use 12/31 for disposal date and indicate worthless

[Meena K]

Could you provide more explanation for your response below and an example with reference to the current TT 1099-B form?

if it is, add the item to the 1099-B use type f or x - proceeds and cost not reported to IRS. use 12/31 for disposal date and indicate worthless

Thank you.

[JamesG1]

If the stock is worthless, you should be able to report your complete investment in the stock.

Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year.

A stock may become worthless when the corporation files for bankruptcy, stops doing business, and has no assets. Financial difficulties will not make a company's stock worthless unless there's no hope that the company will survive.  Worthless stock includes abandoned stock, permanently surrendered for no consideration.

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.

See IRS Publication 550 Investment Income and Expenses, page 54.

You may enter the summary information instead of each individual transaction.  Create a .PDF of the IRS form 8949 to upload into TurboTax Online.  Follow these steps.       

1. Down the left side of the screen, click Federal.
2. Down the left side of the screen, click Wages & Income.
3. Click the down arrow to the right of Investments and Savings.
4. Click to the right of Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B).
5. Click Add investments.
6. On the Let's import your tax info screen, select Enter a different way.
7. On the OK, let's start with one investment type screen, select Stocks, Bonds, Mutual Funds, then Continue.
8. At the screen Which bank or brokerage, enter the information.  Click Continue.
9. Do these sales include any employee stock, enter No.
10. Do you have more than three sales, enter No.
11. Do these sales include any other types of investments, enter No.
12. Did you buy every investment listed, enter Yes.  Continue.
13. On the screen Now, choose how to enter your sales, select One by One.  Select Continue.
14. At the screen Look for your sales on your 1099-B, select Continue.
15. You will now be able to enter $0 total proceeds (sales) and your cost basis, along with the sales category. Refer to your IRS form 1099-B, IRS form 8949 and / or Schedule D Capital Gains and Losses for the amounts and category. When finished, select Continue.
16. At the screen Let us know if any of these situations apply to this sale, select This was a worthless security.
17. When completed, close the record and click Continue.