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Level 1

When can I take capital gains loss for a worthless security?

I have bought stocks and bonds issued by companies that have gone into bankruptcy. Some of the bonds were turned into stock, or had new bonds that were issued. Others have become worthless. However, Fidelity still shows the worthless investments (as shown on the screen shot; the columns are "Last Price, Today's Gain/Loss, Total Gain/Loss; Current Value; Quantity; Cost Basis.)

When can I take the tax deduction?

1 Reply
Intuit Alumni

When can I take capital gains loss for a worthless security?

You can deduct worthless stock only in the tax year it becomes completely worthless. This normally happens when the corporation files for bankruptcy, stops doing business, and has no assets. Financial difficulties won't make a company's stock worthless unless there is no hope that the company will pull through.

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.

To enter worthless stock as investment sales:

  1. Open (continue) your return in TurboTax.
  2. In the search box, search for investment sales then click the "Jump to" link in the search results.
  3. Answer Yes to the question Did you sell any investments?
  • If you land on the Here's the investment sales we have so far screen, click Add More Sales.
  • Answer No to the 1099-B question.
  • On the next screen, select the type of sale you had (second home, collectible, land etc.) and click Continue.
  • Continue following the onscreen instructions to enter the sale.

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