Question I own stock that became worthless last year. Is this a bad debt? How do I report my loss? Answer If you own securities, including stocks, and they become totally worthless, you have a capital loss but not a deduction for bad debt. Worthless securities also include securities that you abandon. To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Treat worthless securities as though they were capital assets sold or exchanged on the last day of the tax year. You must determine the holding period to determine if the capital loss is short term (one year or less) or long term (more than one year). Report losses due to worthless securities on Schedule D of Form 1040 and fill out Part I or Part II of Form 8949. Additional Information Tax Topic 453 - Bad debt deduction Publication 550, Investment Income and Expenses (Including Capital Gains and Losses) Category Capital gains, losses, and sale of home Sub-Category Losses (homes, stocks, other property)
