Worthless Stock Loss Deduction for GM
GM 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 in GM. 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.
For most GM stockholders, your worthless stock loss (your tax basis in GM) will be less than what you paid for GM stock. That is because, for most investors and former employees, some of the basis must be allocated to Directv, News Corp, EDS, Raytheon and Delphi. If you cannot prove what your stock basis is in GM, the IRS can easily deny the worthless stock loss.
The timing of the worthless stock loss can be tricky.
Cost Basis Calculation:
We are not aware of ANY circumstances where the IRS has successfully challenged any of the thousands of basis computations made with Denver Tax Software basis calculators.
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Timing of a GM Worthless Stock Loss
You can deduct your worthless stock loss in the year the stock becomes worthless. Sometimes that can be tricky. In the case of GM, the stock clearly became worthless in 2009 when GM declared bankruptcy.
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. A 2009 GM worthless stock loss cannot be deducted on any year's return other than your 2009 return. GM's FAQ from management indicating that GM pre bankruptcy shareholders are most likely holding worthless stock in 2009.