Worthless Securities

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Worthless Securities

The deduction for a worthless security must be taken in the year in which it becomes worthless, even if it is sold for a nominal sum in the following year. If you do not learn that a security has become worthless until a later year, you should file an amended return for the year in which it became worthless. Since it may be difficult to determine exactly when a stock becomes worthless, the capital loss deduction should be claimed in the earliest year in which such a claim may be reasonably made. Keep in mind that you should keep any documents indicating the date on which the security becomes worthless. Examples of sufficient documentation are bankruptcy documents and financial statements.

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