DD Support Board and Research Team

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No, this is a used mechanism to take a tax loss on a revoked stock.

What one needs to do is draft a stock purchase agreement by and between the purchaser and seller. State a value, for instance $1 (not per share, but for the aggregate). In the agreement disclose the actual certificate and amount including the name(s) of the purchasers and sellers. Also, get the seller to either sign the back of the certificate or attach a stock power that has been assigned and medallion signature from a bank (obviously this is done at the bank). Note the attachments in the agreement.

In the tax year ending use the cost basis for purchase and this sale as the sale proceeds and apply the loss. Keep the records in the event of an audit, but no it does not have to be sent as an exhibit on the tax returns.

This is one of the easier mechanisms to take advantage of a tax loss on a worthless stock.