Worthless stock

If you currently have some stock that has become worthless, or even nearly-worthless, you can take a capital loss deduction for the year it becomes totally worthless. But if the stock still has any value at all, even a little, using a tax write-off has to be done very carefully and with a little planning.

There are four basic strategies for writing off nearly worthless stock- two are used for "keeping" the stock and the other two are used for writing off the stock and getting your tax savings sooner. Here are the two strategies for "keeping" the stock:

1. Sell the stock, take a capital gain loss (long or short-term depending on how long you have had the stock), then buy it back after the 30-day wait period required for tax purposes. If the price of the stock increases during that time you will have to pay for the increased value.
2. You can sell the stock to someone who is an unrelated party (possibly a friend) then take a capital loss. You may be interested in having your friend keep the asset because of any possible future increase in the value of the stock; you can buy it back after the 30 days for the same price you sold it for. If the stock has increased in value, and you buy it back for the same price you sold it for, the difference in value will come to you as a gift (as long as the party giving you the gift doesn't exceed their $11,000 yearly limit; it's $22,000 of married and filing a joint return).