In the last few years, have you purchased stock in a dot-com that's now out of business? Do you hold other shares that are now worth only pennies? In some cases, you may be able to take a tax loss for a worthless security. Here's a quick look at the tax planning rules:
You must be able to identify an event that caused it to become worthless and a date for that event.
For example, even if the company declares bankruptcy, the stock may not be worthless if there's a chance it will reorganize and emerge from bankruptcy. But if it becomes clear at a bankruptcy hearing that the creditors will own the reorganized company, you can consider your stock worthless at that time.
You must claim a worthless security's loss in the tax year it became worthless. In order to recoup tax savings verified in later years, the IRS allows you to go back seven years to file an amended return claiming the loss.
These are general rules and it is often a judgment call to decide that a stock is worthless.