RCC Holdings Corp fka RCCH

[johnnyfiber]

Claiming a Worthless Stock Deduction May Have Become a
Little Easier

http://www.abanet.org/buslaw/committees/CL690000pub/newsletter/200807/reinstein.pdf

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Worthless securities. Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. This affects whether your capital loss is long-term or short-term. See Holding Period , later.

Worthless securities also include securities that you abandon after March 12, 2008. To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift.

If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. Do not deduct them in the year the stock became worthless.

How to report loss. Report worthless securities on Schedule D (Form 1040), line 1 or line 8, whichever applies. In columns (c) and (d), enter “Worthless.” Enter the amount of your loss in parentheses in column (f).

http://www.irs.gov/publications/p17/ch14.html#en_US_publink1000172262

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But what if the stock still shows up trading on the pink sheets with an asking price of a fraction of a penny per share? Some advisers say that miniscule value means the stock is not worthless. But an experienced CPA and a long-time IRS employee both told me that if your block of stock would bring less than the broker's commission for selling it, they'd claim a worthless stock deduction -- assuming they had evidence that the company met its demise in 2007.

http://www.kiplinger.com/columns/taxtips/archive/2006/tax0313.html

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If the stock is worthless, Matheson said your broker can provide you with a worthless securities letter as your backup for taking the deduction. The deduction will be a capital loss and reported on your 1040 Schedule D. Write "worthless" in the sales price box, and your loss will be equal to your cost basis, he said.

http://www.nj.com/business/index.ssf/2010/01/tax_rules_for_worthless_stocks.html