FairPoint Shareholders Will Probably Qualify For A Worthless Stock Loss Deduction
FairPoint 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 FairPoint. 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!
January 24, 2011 News Release:
From reading this news release, the "old" FairPoint Communications stock has been cancelled. You can now use old Fair Point Communications stock certificates as wallpaper :-(. The worthless stock losses must be taken in 2011.
You can deduct your worthless stock loss only in the year the stock becomes worthless. Sometimes that can be tricky. In the case of FairPoint, the stock clearly became worthless in 2011 when FairPoint bankruptcy steps have been completed.
If FairPoint became worthless in 2011, report the loss on your 2011 Form 1040, Schedule D which is due April 15, 2012. If you don't report your worthless loss on your 2011 return. You, generally, have until April 15, 2019 to report the worthless 2011 loss on an amended 2011 return.
The law is very specific on the timing issue. If FairPoint becomes worthless in 2011, a 2011 FairPoint worthless stock loss cannot be deducted on any year's return other than your 2011 return.
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