How to Claim Capital Loss from Debtor Chapter 11 Bankruptcy

I invested XYZ company's note. On 1/21/05 XYZ company filed chapter 11 bankruptcy, it converted to chapter 7 bankruptcy on 5/17/05. Since then I have not receive any capital loss statement except a notice from a State branch of United States Bankruptcy Court.

It has been more than 3 years since XYZ filed bankruptcy. My question is

  1. How can I claim the capital loss with my tax return?
  2. Will my right to a tax refund from my loss as an investor in XYZ company's note expire on April 15, 2008?

Any suggestion is appreciated.

Reply to
lipingli800
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Which said ....?

You can't until your asset is worthless. That will been when the debtor has been "discharged" from bankruptcy and you've been told how much you're getting from the payout.

No. You show the loss on your return for the year it becomes worthless, and the time for doing so in an amended return is extended to 7 years. See page

37 of IRS Publication 550.
Reply to
Phil Marti

Can he sell his interest to someone for a nominal price, and take the loss in 2008?

Reply to
NoSuchPerson

Sure, as long as it's not a class of buyer that would disqualify the loss. See Publication 550.

Reply to
Phil Marti

Sure, as long as it's not a class of buyer that would disqualify the loss. See Publication 550.

Reply to
Phil Marti

Which said > The court letter only requested proof of claim against the Debtor.

Now all my investment is pennyless. Although the court process is not settled yet, may I claim INVESTMENT THEFT based on IRS code 165 (c) (2)? Thanks.

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Reply to
lipingli800

Not until the bankruptcy court says it is. You may get nothing, you may get less than a penny on the dollar, but until that's known your security isn't worthless.

Reply to
Phil Marti

But don't look for a bankruptcy "discharge" if your investment is with a corporation or partnership - discharges are issued only in personal Chapter 7 cases.

You can follow the progress of the bankruptcy case through PACER -

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Reply to
Paultry

So that means I can do nothing to recover my loss before the case close? !

As I know the Debtor (XYZ company) was sued in several states for investment fraud. If the case is not close within 7 years, will my right to a tax refund from my loss expire?

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Reply to
lipingli800

Maybe your broker or a friend will buy it from you for $1.

Reply to
DF2

You evidently have never looked at the Publication 550 reference you were given days ago. Do so, and you'll find that the 7 years runs from when it's worthless, which is when the court says it is.

Reply to
Phil Marti

I'll pay you a nickel for your interest. If you sell it to an unrelated party, you can take the loss immediately.

Seth

Reply to
Seth

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