Losses (Homes, Stocks, Other Property)
Question: I own stock that became worthless last year. Is this a bad debt? How do I report my loss?
If you own securities, including stocks, and they become totally worthless, you have a capital loss but not a deduction for bad debt. A stock or other security is treated as becoming totally worthless when it has no value and you must abandon it. To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it.
- Treat worthless securities as though they were capital assets sold or exchanged on the last day of the tax year.
- Report worthless securities on Form 8949 (PDF), Part I, line 1, or Part II, line 3, whichever applies. Indicate this as a worthless security deduction by writing "Worthless" in the applicable column of Form 8949.
- Tax Topic 453, Bad Debt Deduction
- Publication 17, Your Federal Income Tax (For Individuals), Chapter 1, What Records Should I Keep?
- Publication 550, Investment Income and Expenses (Including Capital Gains and Losses)
Category: Capital Gains, Losses and Sale of Home
Subcategory: Losses (Homes, Stocks, Other Property)