How do we report worthless stock...

[neilbrink]

When the stock is being held in paper and the company has gone out of business. There is no investment firm involved, so no statement showing it is worthless stock. We do have a basis - client kept the statements that show all the purchases she made through the years, but how do we input that info onto the Schedule D?

[kcjenkins]

Well, I'll tell you the easiest way. You buy the stock from your client, for $1. Then report the sale. I have a folder with 6 or 7 stock certificates I got that way.

[JohnH]

I'd do that except for one problem.

I can imagine the phone call from some clients during tax season:

"Hey, just asking how it's coming with my tax return.

Oh, and by the way, can you check to see if that worthless stock I sold you has ever recovered any value?"

[Catherine]

Google search for the date the company declared bankruptcy or shut its doors; there is usually an article published somewhere. Or secretary of state where the company incorporated for date of dissolution. Either of those methods gives you a "date worthless" as well as justification in stating the value is $0. Put a copy of the article (paper or electronic) in with the client's documents and keep one for yourself as well.

[Guest Taxed]

Not so worthless after all. One of my client's mother had stocks from a company called North American Aviation (not sure of the exact name) BUT it was a aircraft manufacturer that existed prior to WWII. Then I think it got sold out or went belly up after the war. She sold those shares to a collector for decent money and kept 1 framed in her living room. I think she worked for that company in her youth.