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In February 2010 I purchased a Private placement which consisted of a Warrant and a Convertible Promissory Note. All outstanding principle and unpaid interest would be payab le in full in February 2013. I never received the principle back. This was because the Private Placement was an entity controlled by a person who filed Bankruptcy and the private placement is considered an asset in his bankruptcy estate. In addition I am told I have to refund some past "dividends" [actually it was interest] that I previously received because he did not get the courts permission to make the payments My questions: 1. Can I take the loss of my investment on my tax return? If so where [what line] 2. Do I have to return the dividends/interest? If so Can I deduct it on my tax return? If so where Thank you
Dear Friend,Hello and welcome. Thank you for providing an opportunity to assist you.
What you are talking about is a "writing off worth less stocks" on your income tax returns and claiming the loss. Under certain circumstances you can certainly do it.
Before you can use this tax break, the instrument / stock must be totally worthless. Make sure they are not even worth even few pennies. If you truly do have a dead stock, you treat it on your tax return as if it were a capital asset you sold for zero dollars on the last day of the tax year.
So far as reporting or filing is concerned -- the valueless stock on line 1 of Part I or line 3 of Part II of Form 8949, depending on whether it was a short-term or long-term holding. If an asset became worthless during the tax year, it is treated as though it were sold on the last day of the year. That could affect whether your capital loss is a short- or long-term one.Your worthless stock losses, either short-term or long-term, can offset capital gains dollar for dollar. If you have more in capital losses than gains, then your loss can offset ordinary income up to $3,000. Additional losses can be carried forward to future tax years.
I am not sure but I just do not think that you might have to return the dividends or interest.
I hope this helps. Please feel free to revert back with a reply if you need further assistance and I would be more than happy to help you further.Warm Regards,
How can I determine the Private Placement is completely worthless.?
They did not return my principle. Can not contact Company. Remember this is a private non-exchange listed instrument.
Who can I contact regarding the Dividend issue.
Please note this is not a Stock it was a Convertible Promissory Note which was purchased in a private placement. They defaulted by not
Since they defaulted can I write it off
So I can deduct it on Schedule D or is it considered a loan which I will not get back and have to write off somewhere else on my 1040
I previously asked:
In February 2010 I purchased in a Private placement a Convertible Promissory Note. The principle was suppose to be paid back in February 2013.
I never received the principle back since the entity was controlled by an individual who filed Bankruptcy and the courts determines that the "private placement" is considered as an asset in his bankruptcy estate
You said I can write it off ob Schedule D to the extent allowable by law.
I thought that it should considered a bad debit [Since I really loaned them the money] and it should be written off on Scedule A?