When to take loss on defunct company?

Years ago I invested in a company that never made it. Last year they were still in business, now I am not so sure. I hate to call and ask if they are still in business. (I realize I don't need to ask, if they answer they are still alive, but if I call they will know why.) I have a net capital loss carryforward, so it won't affect my 2011 tax return one way or another; but is it important to take a loss immediately when they go under, or can I do sometime in the future when I happen to find out they are out of business?

I get financials every few years, but hate to bother them.

Reply to
Confused
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I assume this is a closely-held company and you can get financial information only by calling the company or its principals.

If it's a publicly-held company your broker or many on-line services can get you that information.

The rule is: While the stock still has some value -- that is, it is not "Completely Worthless" the only way to write off your loss is to sell the stock.

And if it is Completely Worthless, you must claim that loss as of Dec 31 of the year in which it became completely worthless. Note that a value of say 1 cent per share is not completely worthless.

Even if it is operating as a business, it could have gone through bankruptcy in which the stock was made worthless.

The year a company's stock becomes Completely Worthless is the year in which it had some value on January 1 but is completely worthless on Dec 31.

So, sure, check with the company itself and maybe they would even be willing to buy back your stock at a price they name. Or sell to a disinterested party with a good bill of sale etc and claim the loss.

Reply to
Arthur Kamlet

On 2011/08/25 15:18, Arthur Kamlet wrote: [...]

And you have seven years to file an amended return for that year, claiming the loss.

Reply to
Mark Bole

Yes, it is closely held.

At what point does it become completely worthless? Could I sell the stock to my son for a token fee in order to take my loss if the company refuses to cooperate? And if it ceased to exist in 2010, but I missed that, would I have to file an amended 2010 return even though it wouldn't affect my 2010 return except to increase my loss carry forward?

Reply to
Confused

,

Note that you have SEVEN years to amend your return for the year in which it finally becomes worthless, as long as it's a corporation.

Reply to
D. Stussy

If you get a statement from your broker that their fee for selling is higher than the proceeds you could get, that should do it.

No, your son is related to you. You could sell it to me for $1.

If you wanted ever to use that loss carryforward, then yes.

Seth

Reply to
Seth

What is your authority for these related party transactions? I can see such a thing would apply if your son is a dependent within the meaning of form 1040 (ie. your child under 24 if in college, or any age if mentally incapacitated, or your child). But if your child is independent, then why not?

Reply to
removeps-groups

IRC Section 267 that disallows losses between certain related parties.

Reply to
Alan

If you want a mere Pub reference, see Example 1:

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Reply to
Arthur Kamlet

IRC Sect. 267

Reply to
Richard Di Bernardo, CPA

Consider a Sect 1244 loss. If the stock qualifies up to $50,000 or, if married, $100,000 of the loss would be ordinary.

Reply to
Richard Di Bernardo, CPA

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