Worthless? Securities

[erchess]

A client has received from his broker a statement that puzzles me. The letter is dated 17 March 2010. It states that 3000 shares of ECO 2 INC CM and 1000 shares of VANDERBILT T GOLD CORP COM are going to be removed from his account and sent to the Depository Trust Company. This action is being taken because the securities do "not hold any value that we are aware of "and have "not had a transfer agent, to facillitate the change in ownership necessary for trading, for more than six years." If the shares resume trading the "DTCC will use its best efforts to restore the positions in your account." Perhaps the most interesting thing to me is that my client is not being offered the chance to receive these certificates in the mail. In the past when brokerages have decided to stop carrying shares in my account or that of a client there has been the option to receive the shares.

May my client write off his basis as worthless securities on his 2010 return? What is missing from the broker's letter is any statement that the boards of these two companies voted to go out of business or voted that the stock had no value because they were bankrupt. I was taught that this is necessary. I am also concerned that perhaps the shares actually became worthles "more than six years ago" and that it is now too late to claim the loss.

[JON]

I love the

letter except for the part about not trading for years and will try to return them to your account if they ever start trading again. From the broker we like to have XXX Co stopped trading and operations on xx/xx/09 and we consider the stock worthless.

I would write it off if I were you, but the fact that it should have been written off years ago or maybe it will comeback does not help, but unless you know that the companies are still operating I would write them off.

[BOB W]

Don't forget>> It is the year of loss OR the year the loss was discovered.

[FEDUKE404]

Certificate - what's that?

Stock certificates are going the way of the rotary phone and 8-track tapes.

IF you want a certificate, expect to pay dearly for that choice. Along a similar line, why would the client want the certificates in the first place? Wallpaper or birdcage liner?

I've actually had the opposite problem, with a stock long ago written off as "worthless" but still showing in my account....with zero value.

I would love to get that clutter off of my monthly statement. In recent memory, some firms would "buy" your stock for $1 just to show a sale and close out such junk. Apparently the brokerage firms have quit doing that.

FE

[Gene V]

Don't forget>> It is the year of loss OR the year the loss was discovered.

Seems like I read that was for Theft, I suppose loss could be the same.
Anyway, you have up to 7 years to file amended return for worthless securities.

[BOB W]

Seems like I read that was for Theft, I suppose loss could be the same.
Anyway, you have up to 7 years to file amended return for worthless securities.

Gene> My oops (brain dead).... you are right, different set of circumstances.

[erchess]

Bottom LIne

So should I find out what year they actually became worthless and amend or should I claim the loss for 10? The client is actually hurting for deductions in 2009 - please chime in anyone who thinks I can claim them for 09?

[FEDUKE404]

Find out when worthless

So should I find out what year they actually became worthless and amend or should I claim the loss for 10? The client is actually hurting for deductions in 2009 - please chime in anyone who thinks I can claim them for 09?

If they were truly "worthless" ( = not trading at all) sometime during 2009, then the sale date is 12/31/2009 and take the loss. Most software has a box to check for a "worthless security" and does everything automatically for you.

However, if shares are not yet worthless, you must either sell them to generate a loss or go through the same evaluation process on 12/31/2010.

(I'm not sure of your terms, but if the stock actually became worthless in a prior year - use 12/31/xxxx and amend, claiming the loss for that specific tax year.)

From the OP, you may now be outside the range for amending the "worthless" year tax return. My best guess is that horse has already left the barn...... I don't really see how you could possibly claim a tax year 2010 loss.

FE