With the declining dollar and values of corporate stock you might be encouraged to know that you can still offset some of your loss from a worthless stock. This means that the stock is totally worthless. You need to do some research to confirm this, however, because even if the stock is worth a few pennies it is not worthless as far as the IRS is concerned. Tax experts say that you need to be able to nail down a few things to confirm you stock value before you claim it as worthless with the IRS.

They are:
1. There is no hope investors will ever get anything for their holdings; and
2. When the security became worthless and lost all its value.

Once those two things are confirmed you may be able to report the valueless stock on Schedule D of your return. If you have already filed your return for the tax year the stock became worthless you may want to amend your previous return for that year on Form 1040X. There are some applicable time limitations for amending. You may have up to seven years from the date your original return had to be filed or two years from the date you paid the tax to amend. Please check with your tax advisor about all of these issues as we are not tax accountants and nothing in this blog constitutes legal advice nor does it establish an attorney client relationship where one did not exist before.

For additional information you can read the entire article at: http://www.bankrate.com/nltrack/itax/tips/20010223a.asp

Chandra

Sentinel Management Group, Inc., managed around $1.4 billion in funds for financial institutions and individuals. On August 17, 2007 Sentinel crumbed and filed for Chapter 11 bankruptcy protection in Chicago, Illinois. The firm is facing lawsuits from not only their clients but also the U.S. Securities Exchange Commission. Former top executives, Philip Bloom and his son, Eric Bloom, are working on settling a $350-million fraud lawsuit filed by the firm's bankruptcy trustee, Frederick Grede. Grede alleges in his October 11th lawsuit (Case No. 07-00981) that the executives committed, "a long-term, massive fraud against Sentinel and its customers." The lawsuit also names Charles Mosley, the firm's head trader, investment vehicles, and family trusts as defendants. The Blooms have confirmed that the parties have agreed on the settlement amount and payment terms and are working on the third draft of the settlement agreement.

On February 28, 2008 The Bank of New York filed an adversary proceeding against Grede (Case No. 08-00127) requesting a declaratory judgment for a valid, first-priority lien for over $312-Million against the Sentinel's assets in their bank. Grede filed a Motion to Dismiss in lieu of an answer on March 14 which is scheduled to be heard April 22, 2008.

Before Grede filed his Motion to Dismiss, however, he filed a separate adversary proceeding against The Bank of New York (Case No. 08-00127) on March 3, 2008. The fifty-nine paged Complaint alleges the bank's "misconduct played a pivotal role" in Sentinel's collapse in four ways. Specifically, the bank, "established a fundamentally flawed account structure for Sentinel's accounts in violation of its obligations under federal law and its duties to Sentinel; aided and abetted breaches of fiduciary duty committed by certain Sentinel insiders; knowingly accepted fraudulent and preferential transfers as part of the Sentinel insiders' scheme; and engaged in inequitable conduct." The bank's answer is due May 2, 2008.

The latest lawsuit (Case No. 08-00167) was filed on March 20th by Grede against McGladrey & Pullen, LLP ("M&P"), a national accounting and auditing firm who served as the independent auditor for Sentinel, alleging Negligence/Malpractice and Aiding and Abetting. The lawsuit alleges, in part, "[t]he material misstatements and omission in Sentinel's financial statements and deficiencies in M&P's audit procedures directly related to the financial circumstances and activity that led to Sentinel's demise". The lawsuit also named the partner at M&P that served as the engagement partner for Sentinel's 2006 audit, Victor G. Johnson. The defendants' answers are due April 21st.

You can review the article at: http://www.chicagobusiness.com/cgi-bin/news.pl?id=28781

The information stated above not mentioned in the article were collected by reviewing the above-referenced adversary cases of action and the underlying Bankruptcy Petition.

Chandra

Although Judge Jeffrey Hoskins was acquitted of all 15 criminal charges (eight in December 2006 and the remaining seven in August 2007), he incurred numerous attorney fees. On March 26, 2008 Judge Hoskins and his wife filed for Chapter 13 bankruptcy protection in Ohio. In a civil suit, Hoskins was ordered to pay $354,465 to the bank that refinanced his 60 acres of farmland. He testified in his trials and an ethics hearing last year he had more than $800,000 in personal debt. Hoskins was quoted in January as saying, "It was a choice, do I pay for my defense or do I make this mortgage payment? I chose to pay toward the defense."

You can view the entire article at: http://www.dispatch.com/live/content/local_news/stories/2008/04/01/judge.html?print=yes&sid=101

Chandra

The 35-year old company filed for bankruptcy protection under chapter 11 Wednesday, April 2, 2008, due mainly to high fuel prices and their loss of an agreement with Federal Express, which helped offset the company's fuel bill. The company had announced in a statement last month that all domestic flights out of Chicago's Midway Airport would cease on April 14 and all the international flights on June 7. The airlines, once the 10th-largest, operated only six flights a day out of Midway. Those flights were to Oakland, Dallas/Ft. Worth, Guadalajara and Cancun.

Passengers and employees were shocked to find out that ATA Airlines discontinued all flights earlier than anticipated. When passengers arrived Thursday they found an empty check-in counter. Those passengers who bought their tickets with a credit card are directed to contact their credit card company for a refund from the unused tickets. Those who bought their ticket through Southwest Airlines is instructed to contact Southwest. It wasn't just the passengers who were caught off-guard. One employee, who had worked at ATA for 15 years, was contacted at 3:00 am Thursday morning and told not show up for work that day or ever again. Another employee admitted that they all knew this day was coming, but was shocked by the sudden announcement.

You can view the entire article at: http://www.chicagotribune.com/travel/chi-ata-webapr04,0,6791752,print.story. The case is pending in the Southern District of Indiana (Indianapolis); Case No. 08-03675.

Chandra

Berry-Hill Galleries, a New York dealer in American art filed for bankruptcy under Chapter 11 on December 8th. The gallery's chief restructuring officer, Alan M. Jacobs said that the filing resulted from disputes with the gallery's lenders and with the auction house Christie's.

You can read the full story at: http://www.theartnewspaper.com/article01.asp?id=122

Michelle