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I have shares of a company that is listed on the stock exchange for less than a penny per share. The company has disappeared. we can't find anyone related to the company. But, the IRS says that the shares are not worthless, so I cannot take a loss. A quote from the certificates is "The shares represented by this certificate are transferrable only on the stock transfer books of the corporation". But the company cannot be found. How do I take a loss for these worthless shares? A. J. XXXXX
1st: But, the IRS told me that they are not deemed worthless since they are still listed on the Exchange.
2nd: If I follow your advice, then they can only be taken to offset capital gains, not distributions from my IRAs.
No, they are NOT held in a IRA. I meant that when I take my RMD for the year, I have a tax liability. I was hoping to use the stock loss to offset the extra income. You said that they can ONLY be used to offset non IRA capital gains, not IRA income. Is that correct?
Next, How do you explain your opinion against what the IRS told me of them not being worthless since they are still listed on the Stock Exchange?
And, if I can claim them as worthless, How do I go about abandoning & permanently relinquishing all rights"? Do I Send them somewhere or burn the or what?
Hello and thank you for using Just Answer, If the stock is even worth less than a penny per share, it is not worthless. You can't take a capital loss deduction on your income tax return for an investment that still has value, even if the remaining value is vastly lower than the original value. Even if you could claim it was worthless, you would still not be able to use more than $3000 a year (if you have no gains to deduct against). Depending on how much you are receiving from your IRA that may not help as much as you would like. If you do not wish to hold this low valued asset then you could sell. That way you have a specific date for showing the loss. You would still not be able to receive much help on the IRA distribution but under your first points you were not going to get that anyway.
You asked about how to abandon a stock or security:
(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.
What that actually means is the stock is worthless and the taxpayer says that's it, I give up on ever thinking it will come back. So they give teh stock back to teh company that issued.
The stock has to be worthless to abandon it and the issuing company takes it back without the taxpayer expecting to get any compensation at all for it .
That's all fine & good, but I can't give it back to the company, because the company cannot be found. There are no people associated with the company that can be found.
Then, the IRS was right, since the stock has a value on the Exchange, it cannot be deemed worthless. Is that correct?
Also, They are the type of shares that cannot be sold on the open market. According to the writing on the shares, they can only be signed by the company attorney (who cannot be found).
Do I have any other alternative other than eating the loss?
Greetings, One other idea you may try. Many brokerage houses (TD Ameritrade, etc.) will "buy" back your worthless shares even if they are not able to be traded. It essentially transfers the shares out of your name, relinquishing your rights to them and thus constituting a sale. They typically won't pay you more than $1 for the shares and it will usually cost you the price of a trade - typically less than $10. So for $10 out of your pocket to take the capital loss it might be worth it. I would recommend you check with the company that houses your portfolio and see if they can do this. If they can't, you might be able to transfer them into another trading account with a company that will do this.
TD Ameritrade & Morgan Stanley have already refused the shares, because they can only be turned over to a non existing company. Can I sell them to a person on the street, a relative or anyone for a penny?
I just talked to my broker. He said that the stock shows a zero value. He tried to sell some of the same shares in another account, but could not because they are listed at $0.00 per share. Not even a penny. Does this make them "worthless" since they do not have a value on the Exchange?