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Lane
Lane, CFP, MBA, CRPS
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Experience:  Providing Financial & Tax advice since 1986
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How can I find out if and/or when Washington Mutual Bank stock

Resolved Question:

How can I find out if and/or when Washington Mutual Bank stock has been declared worthless?
I have recieved a distribution of new stock, which I sold in 2012. I need to see if I can use my original cost basis against the distribution.
TDAMERITRADE shows 1700 original shares in escrow.
Submitted: 1 year ago.
Category: Finance
Expert:  Lane replied 1 year ago.


The bankruptcy case was closed on March 7, 2012.

Any time a bank holding company such as WMI goes into FDIC receivership the stock is rendered worthless at that point.

They were placed into receivership on September 25, 2008.


Let me know if you have further questions.

Lane
Customer: replied 1 year ago.

Then why did Washington Mutual file for chapter 11 bankruptcy protection? And have the stock relegated to the pink sheets?


The pink sheet stocks were tradeable until March 7, 2012. Shouldnt this be the date of worthlessnes if no futher legal actions are pending?

Expert:  Lane replied 1 year ago.

Thats a different issue (no pun intended). not the same stock/shares

No those shares were the very speculative share (NYSE won't even list them) that are traded on the speculation that bankruptcy protection might end up generating some value for that "protected" equity ....WAMUQ.PK

See this:

"Then there was a ballot process early this year. Shareholders who voted for the settlement, signed the required release, and mailed it back in a timely fashion, will get a share of the $140 million reinsurance company that will exist after the bankruptcy. About 60% of the common shareholders did just that, according to one of the attorneys involved. The remaining 40% get nothing"

http://www.weissratings.com/news/articles/washington-mutual-settlement-some-shareholders-get-nothing/
Customer: replied 1 year ago.
Relist: Inaccurate answer.
Expert:  Lane replied 1 year ago.

Maybe putting this in perspective will help: (Although I provided the link)

Washington Mutual Bank was placed into a Federal Deposit Insurance Corporation (FDIC) receivership on September 25, 2008, and immediately sold to JPMorgan Chase (JPM) for $1.9 billion. Any stock ownership interests in WaMu bank were rendered worthless by the FDIC receivership. But the morning after WaMu bank was sold, its parent holding company, WMI, filed for Chapter 11 bankruptcy protection in Delaware.

WMI ended up with three different stocks, including common shares that continued to trade on the so-called “pink sheets” under the symbol WAMUQ.PK after being delisted from the New York Exchange.

 

Then there was a ballot process early this year. Shareholders who voted for the settlement, signed the required release, and mailed it back in a timely fashion, will get a share of the $140 million reinsurance company that will exist after the bankruptcy. About 60% of the common shareholders did just that, according to one of the attorneys involved. The remaining 40% get nothing.

 

"Relegated to pink sheets is not accurate"

 

That was a different security.

 

When you either accepted the settlement or did not the loss manifested.

 

But the DATE of the worthlessness of WMI is September 25, 2008.

 

 

 

 

 

 

 

Maybe this will help:

 


Effective: March 12, 2008
26 C.F.R. § 1.165–5, Treas. Reg. § 1.165–5
§ 1.165–5 Worthless securities.
(a) Definition of security. As used in section 165(g) and this section, the term “security” means:
(1) A share of stock in a corporation;
(2) A right to subscribe for, or to receive, a share of stock in a corporation; or
(3) A bond, debenture, note, or certificate, or other evidence of indebtedness to pay a fixed or determinable sum of money, which has been issued with interest coupons or in registered form by a domestic or foreign corporation or by any government or political subdivision thereof.
(b) Ordinary loss. If any security which is not a capital asset becomes wholly worthless during the taxable year, the loss resulting therefrom may be deducted under section 165(a) as an ordinary loss.
(c) Capital loss. If any security which is a capital asset becomes wholly worthless at any time during the taxable year, the loss resulting therefrom may be deducted under section 165(a) but only as though it were a loss from a sale or exchange, on the last day of the taxable year, of a capital asset. See section 165(g)(1). The amount so allowed as a deduction shall be subject to the limitations upon capital losses described in paragraph (c)(3) of § 1.165–1.
(d) Loss on worthless securities of an affiliated corporation--(1) Deductible as an ordinary loss. If a taxpayer which is a domestic corporation owns any security of a domestic or foreign corporation which is affiliated with the taxpayer within the meaning of subparagraph (2) of this paragraph and such security becomes wholly worthless during the taxable year, the loss resulting therefrom may be deducted under section 165(a) as an ordinary loss in accordance with paragraph (b) of this section. The fact that the security is in fact a capital asset of the taxpayer is immaterial for this purpose, since section 165(g)(3) provides that such security shall be treated as though it were not a capital asset for the purposes of section 165(g)(1). A debt which becomes wholly worthless during the taxable year shall be as an ordinary loss in accordance with the provisions of this subparagraph, to the extent that such debt is a security within the meaning of paragraph (a)(3) of this section.
(2) Affiliated corporation defined. For purposes of this paragraph, a corporation shall be treated as affiliated with the taxpayer owning the security if--
(i)(a) In the case of a taxable year beginning on or after January 1, 1970, the taxpayer owns directly--
(1) Stock possessing at least 80 percent of the voting power of all classes of such corporation's stock, and
(2) At least 80 percent of each class of such corporation's nonvoting stock excluding for purposes of this subdivision (i)(a) nonvoting stock which is limited and preferred as to dividends (see section 1504(a)), or
(b) In the case of a taxable year beginning before January 1, 1970, the taxpayer owns directly at least 95 percent of each class of the stock of such corporation;
(ii) None of the stock of such corporation was acquired by the taxpayer solely for the purpose of converting a capital loss sustained by reason of the worthlessness of any such stock into an ordinary loss under section 165(g)(3), and
(iii) More than 90 percent of the aggregate of the gross receipts of such corporation for all the taxable years during which it has been in existence has been from sources other than royalties, rents (except rents derived from rental of properties to employees of such corporation in the ordinary course of its operating business), dividends, interest (except interest received on the deferred purchase price of operating assets sold), annuities, and gains from sales or exchanges of stocks and securities. For this purpose, the term “gross receipts” means total receipts determined without any deduction for cost of goods sold, and gross receipts from sales or exchanges of stocks and securities shall be taken into account only to the extent of gains from such sales or exchanges.
(e) Bonds issued by an insolvent corporation. A bond of an insolvent corporation secured only by a mortgage from which nothing is realized for the bondholders on foreclosure shall be regarded as having become worthless not later than the year of the foreclosure sale, and no deduction in respect of the loss shall be allowed under section 165(a) in computing a bondholder's taxable income for a subsequent year. See also paragraph (d) of § 1.165–1.
(f) Decline in market value. A taxpayer possessing a security to which this section relates shall not be allowed any deduction under section 165(a) on account of mere market fluctuation in the value of such security. See also § 1.165–4.
(g) Application to inventories. This section does not apply to any loss upon the worthlessness of any security reflected in inventories required to be taken by a dealer in securities under section 471. See § 1.471–5.
(h) Special rules for banks. For special rules applicable under this section to worthless securities of a bank, including securities issued by an affiliated bank, see § 1.582–1.
(i) Abandonment of securities--(1) In general. For purposes of section 165 and this section, a security that becomes wholly worthless includes a security described in paragraph (a) of this section that is abandoned and otherwise satisfies the requirements for a deductible loss under section 165. If the abandoned security is a capital asset and is not described in section 165(g)(3) and paragraph (d) of this section (concerning worthless securities of certain affiliated corporations), the resulting loss is treated as a loss from the sale or exchange, on the last day of the taxable year, of a capital asset. See section 165(g)(1) and paragraph (c) of this section. To abandon a security, a taxpayer must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for the security. For purposes of this section, all the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift.
(2) Effective/applicability date. This paragraph (i) applies to any abandonment of stock or other securities after March 12, 2008.
(j) Examples. The provisions of this section may be illustrated by the following examples:
Example (1). (i) X Corporation, a domestic manufacturing corporation which makes its return on the basis of the calendar year, owns 100 percent of each class of the stock of Y Corporation; and, in addition, 19 percent of the common stock (the only class of stock) of Z Corporation, which it acquired in 1948. Y Corporation, a domestic manufacturing corporation which makes its return on the basis of the calendar year, owns 81 percent of the common stock of Z Corporation, which it acquired in 1946. It is established that the stock of Z Corporation, which has from its inception derived all of its gross receipts from manufacturing operations, became worthless during 1971.
(ii) Since the stock of Z Corporation which is owned by X Corporation is a capital asset and since X Corporation does not directly own at least 80 percent of the stock of Z Corporation, any loss sustained by X Corporation upon the worthlessness of such stock shall be deducted under section 165(g)(1) and paragraph (c) of this section as a loss from a sale or exchange on December 31, 1971, of a capital asset. The loss so sustained by X Corporation shall be considered a long-term capital loss under the provisions of section 1222(4), since the stock was held by that corporation for more than 6 months.
(iii) Since Z Corporation is considered to be affiliated with Y Corporation under the provisions of paragraph (d)(2) of this section, any loss sustained by Y Corporation upon the worthlessness of the stock of Z Corporation shall be deducted in 1971 under section 165(g)(3) and paragraph (d)(1) of this section as an ordinary loss.
Example (2). (i) On January 1, 1971, X Corporation, a domestic manufacturing corporation which makes its return on the basis of the calendar year, owns 60 percent of each class of the stock of Y Corporation, a foreign corporation, which it acquired in 1950. Y Corporation has, from the date of its incorporation, derived all of its gross receipts from manufacturing operations. It is established that the stock of Y Corporation became worthless on June 30, 1971. On August 1, 1971, X Corporation acquires the balance of the stock of Y Corporation for the purpose of obtaining the benefit of section 165(g)(3) with respect to the loss it has sustained on the worthlessness of the stock of Y Corporation.
(ii) Since the stock of Y Corporation which is owned by X Corporation is a capital asset and since Y Corporation is not to be treated as affiliated with X Corporation under the provisions of paragraph (d)(2) of this section, notwithstanding the fact that, at the close of 1971, X Corporation owns 100 percent of each class of stock of Y Corporation, any loss sustained by X Corporation upon the worthlessness of such stock shall be deducted under the provisions of section 165(g)(1) and paragraph (c) of this section as a loss from a sale or exchange on December 31, 1971, of a capital asset.
Example (3). (i) X Corporation, a domestic manufacturing corporation which makes its return on the basis of the calendar year, owns 80 percent of each class of the stock of Y Corporation, which from its inception has derived all of its gross receipts from manufacturing operations. As one of its capital assets, X Corporation owns $100,000 in registered bonds issued by Y Corporation payable at maturity on December 31, 1974. It is established that these bonds became worthless during 1971.
(ii) Since Y Corporation is considered to be affiliated with X Corporation under the provisions of paragraph (d)(2) of this section, any loss sustained by X Corporation upon the worthlessness of these bonds may be deducted in 1971 under section 165(g)(3) and paragraph (d)(1) of this section as an ordinary loss. The loss may not be deducted under section 166 as a bad debt. See section 166(e).


26 C.F.R. § 1.165–5




Expert:  Lane replied 1 year ago.


I end with this.

When a stock is worthless from ...

(1) a finance (conventions of modern finance - not meant to replace the colloquial use of the term "financial") perspective.

(2) Worthless under the treasury regs, as above (has the full force of law, but not always what's practiced by IRS until you force them to tax, federal district or Supreme Court)

OR

(3) conventional practices and procedures of IRA are many (mostlyy, in my experience) three different things.



If your objective is to make the case that the stock became worthless this year, that WILL line up with the guidance IRS gives it's field agents ... treat the stock as if it was sold for $0, on December 31st of the tax year when there was absolutely no chance of getting a penny out of the capital asset.

You will have an excellent case ft you take take it this year, and document that the point in time that you had no chance of getting anything was the date by which you had to accept the settlement mentioned above, or get nothing.

 

Be prepared, however for THEM to try to make the case that you could have settled, and just because you missed the opportunity, doesn't give you the right to write off the full amount.

 

My experience with these folks and my clients has been that they will try to make the case that you can only write off the difference between basis and what you could have settled for.

 

 

Hope this helps

 

 

Expert:  Lane replied 1 year ago.

Robert,

This article at bankrate.com should help to support the idea that this year is the year

http://www.bankrate.com/finance/money-guides/writing-off-a-worthless-stock.aspx

... lines up ...

Lane
Customer: replied 1 year ago.
Relist: Other.
I owned shares of Washington Mutual Bank. The bank filed for cpt 11 protection. I recieved a distribution of new shares,( I believe from a share holder settlement I applyed for), in 2012. I sold these shares in 2012 with the intent of caculating my losses against 2012 gains. How can I find out if and/or when Washington Mutual sock became worthless. If the stock is deemed worthless should I report my loss as a worthless stock? Or should I caculate my cost basis against my newly distributed stocks from the settlement?
Expert:  Lane replied 1 year ago.


If you have received the settlement, and sold the shares then what you have is not worthless.

Your basis is what you have invested, and your proceeds of sale is whatever your 1099B- says it was, on the sale of that stock.

You can either do this, or get the bill from IRS that you will receive when they have received their copy of a 1099-B with no corresponding schedule D to report the basis.
Lane, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 3719
Experience: Providing Financial & Tax advice since 1986
Lane and other Finance Specialists are ready to help you
Expert:  Lane replied 1 year ago.

Sorry it took so long to get there.

I did not realize that you had stock from the settlement.

Thanks
Lane
Lane, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 3719
Experience: Providing Financial & Tax advice since 1986
Lane and other Finance Specialists are ready to help you

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