If you are an investor, it is likely that sooner or later you have made an investment that proceeded to go bad. The IRS won’t provide you with the money you lost back, but THE GOVERNMENT shall enable you to have a deduction for losing. But there some rules you got to know. 1. You can’t take an investment before the season the investment becomes worthless, so you’ll have to show that the stock acquired value at the beginning of the year, but not at the end of the year.

If you bought stock in a company that proceeded to go bankrupt, until the bankruptcy is discharged you might not know whether you can collect anything, so you get no deduction until then. 2. You can deduct a loss on the sale of securities. If you think that the stock won’t pay off ever, but you can’t verify it is worthless, sell it on the open market for a couple pennies or money to nail down your deduction. 3. If the security can’t be sold by you, you can abandon it.

You do that by giving up all privileges in the security and not receiving anything in exchange. 4. If you learn your investment became worthless in a preceding season, for this calendar year to claim a refund document an amended tax return. Though usually you just have three years to file an amended return, in the case of worthless investments you have up to seven years from the date … Read more