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