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USTaxAdvising
USTaxAdvising, Accountant
Category: Capital Gains and Losses
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Experience:  Professional in capital gains and finance related questions
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I purchased stocks in 2008 cost basis of $4200. By mid 2012

Customer Question

I purchased stocks in 2008 for total cost basis of $4200. By mid 2012 the same stocks lost all of the value and in virtually non existent and not reflected in my portfolio with the investment company. I had over $2500 long term gain in 2013. Am I allowed
to take advantage of the loss of $4200 to offset some of my gain for 2013 tax year.
Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  USTaxAdvising replied 1 year ago.

Hello,

Essentially yes, if the stock has become completely worthless you can claim an Internal Revenue Code ("IRC") 165 deduction. But you have to file an amended return and claim the loss in the year it became worthless. Please refer to this article here for more information - http://taxation.lawyers.com/income-tax/tax-deduction-for-worthless-securities.html

Please let me know if you have any further questions and I will get back to you as soon as I can.

Best regards,

Customer: replied 1 year ago.
I am not very clear as what action I can take. The example in the link provided was not very helpful. My stocks became worthless sometime in 2012 and in 2013 there was no value nor any mention of stock reported as my securities. I have filled my taxes for 2012 but not claimed any loss in 2012 for this stock and since in 2013 there was nothing reported on it in any statement can I claim the loss in 2013 tax filling since I have not yet filed my 2013 taxes. Thanks for providing more specifics on this question.
Expert:  USTaxAdvising replied 1 year ago.

Hello,

My sincere apologies for the delay. I have been away from internet access all weekend.

If the stock became worthless in 2012 then you would have to take the deduction in 2012, not 2013.

Did You Miss a Deduction?

Mainly because of the difficulty in establishing when exactly a security becomes worthless, you’re given a chance to recover your loss if you don’t claim the deduction in the year your securities become worthless.

You can file a claim for a credit or refund due to the loss by filing an amended tax return for the year the security became worthless(i.e. 2012). You have to file it within seven years from the date your original return for that year had to be filed, or two years from the date you paid the tax, whichever is later.

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