Idearc Shareholders Will Probably Qualify For A Worthless Stock Loss Deduction
Idearc Worthless Stock - Overview
Most stock losses occur when you sell a stock for a loss. A worthless stock loss happens when you hold a stock when it becomes worthless. Worthless means worthless! If a share of stock is worth $0.001, it is not worthless. If it is worth zero, it is worthless.
You can deduct a worthless stock loss as a Long - Term Capital Loss.
The amount of the loss is your tax cost basis (or stock basis) in Idearc. Our software can help you with that. Since there have been many splits and some spin-offs that is good news. Without knowing your cost basis, you have no worthless stock loss deduction.
The timing of the worthless stock loss can be tricky. If you fail to take the worthless stock loss in the correct year, the loss can be denied!
May, 2009 FAQ:
In May, 2009, Idearc published a FAQ document that indicated that current shareholders will get nothing. This indicates that at some time the Idearc shareholders will qualify for a worthless stock deduction. The current thinking is that the bankruptcy will be completed in the third quarter of 2009. (It didn't happen in the third quarter).
September, 2009 FAQ:
In September, 2009, Idearc published a FAQ document that the bankruptcy will probably be completed in the fourth quarter of 2009. As of 10/5/09, the Idearc price is around $0.02. Thus, it does not yet qualify for worthless stock status. If the bankruptcy steps are not completed in 2009, Idearc will not qualify for a 2009 worthless stock loss deduction.
November 18, 2009 News Release:
From reading this news release, it is clear that (1) the stock is not "worthless" yet, but (2) it will be worthless. The current stockholders' stock will be cancelled once the plan or reorganization is effective.
November 20, 2009 News Release:
From reading this news release, it is clear that nothing has changed for the current shareholders since the November 18th news release.
December 10, 2009 News Release:
From reading this news release, it appears that the plan of reorganization is close to being confirmed (accepted). When that happens, the Idearc stock will be worthless.
December 22, 2009 News Release:
From reading this news release, it appears that the plan of reorganization should be confirmed around December 31, 2009. This is critical! If the plan of reorganization is confirmed on or before December 31, Idearc stock will be worthless in 2009. If the plan of reorganization is confirmed after December 31, the Idearc stock will be worthless in 2010 (We are assuming that this happens in 2010!).
December 31, 2009 News Release:
From reading this court document, has been confirmed on December 31, 2009.
January 4, 2010 News Release:
From reading this news release, the worthless stock losses must be taken in 2009.
You can deduct your worthless stock loss only in the year the stock becomes worthless. Sometimes that can be tricky. In the case of Idearc, the stock clearly became worthless in 2009 when Idearc bankruptcy steps have been completed.
If Idearc becomes worthless in 2009, report the loss on your 2009 Form 1040, Schedule D which is due April 15, 2010. If you don't report your worthless loss on your 2009 return. You, generally, have until April 15, 2013 to report the worthless 2009 on an amended 2009 return.
The law is very specific on the timing issue. If Idearc becomes worthless in 2009, a 2009 Idearc worthless stock loss cannot be deducted on any year's return other than your 2009 return. Idearc's FAQ from management indicating that Idearc pre bankruptcy shareholders are most likely holding worthless stock in 2009. (As of 12/7/09, it is not worthless.)
Denver Tax Software, Inc.
Copyrightę 1997-2013, Denver Tax Software, Inc.