Frequently Asked Tax Questions And Answers
Keyword: Worthless Securities
10.4 Capital Gains, Losses/Sale of Home: Losses (Homes, Stocks, Other Property)
I own stock which became worthless last year. Can I take a bad debt deduction
on my tax return?
If you own securities and they become totally worthless, you can take a deduction
for a loss, but not for a bad debt.
The worthless securities are treated as though they were capital assets sold on
the last day of the tax year if they were capital assets in your hands. Report worthless
securities on line 1 or line 8 of Form 1040, Schedule D (PDF),
whichever applies. In columns (c) and (d), write "Worthless." For
additional information, refer to Publication 550, Investment Income and Expenses (Including
Capital Gains and Losses). For more information on bad debts, refer to Tax Topic 453, Bad
Debt Deduction.
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