What is Worthless securities?
In short
A security that becomes completely worthless is treated as sold on the last day of the tax year in which it became worthless, usually producing a capital loss.
Key takeaways
- Using the last day of the year can turn a short-term holding into a long-term one.
- Qualifying small business stock can give an ordinary loss instead.
- Refund claims for worthless securities can be filed up to 7 years later.
Where it's tested
REG: Property Transactions: Gains, Losses & Like-Kind Exchanges — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A business sells equipment for $55,000. Original cost was $50,000 and accumulated depreciation was $30,000. How is the gain characterized?