Legal Question in Tax Law in California

Re: Corporate Chapter 11 Bankruptcy and Claiming Stock Loss on Taxes

Thanks for your posting.

Many stocks of companies that are in bankruptcy, such as Continental, Enron, etc., are still tradeable. If you hold a stock that you have not yet sold, you do not have a loss.

In order to have a capital loss (and thus a deduction), you either have to trade the stock, at a loss, and deduct the loss, or get your broker to certify that the stock is delisted or otherwise untradable, and then take your loss.

Until you sell or try to sell, you don't have a loss you can deduct. Thanks, and feel free to email if you have any other questions!

Re: Corporate Chapter 11 Bankruptcy and Claiming Stock Loss on Taxes

Yes you can assume the stock is worthless unless they reorganize or make efforts to pull it out of the toilet.

You can deduct up to $3,000 per year for investment losses. Check with your tax preparer to make sure you're not already carrying forward losses.

The question as to consequences is too vague and I would not care to hazard a guess as to what this means. Please contact me if you care to express more specificity.

Re: Corporate Chapter 11 Bankruptcy and Claiming Stock Loss on Taxes

PG&E is in Chapter 11 bankruptcy. Is their stock worthless? Until you get more information on the recovery of the company, do not assume they have totally gone under.

Chapter 11 is a reorganization bankruptcy. Usually creditors take less, but if they get the company reorganized, it could still be a going concern, and the stocks could still be worth something.