INVESTING
Don’t write off your GM stock quite yet
Automaker’s stock is not worthless
You own GM stock, but when will it be viewed as worthless and be a write-off?
Here’s the short answer: We don’t know.
William E. Massey, senior tax analyst from the tax and accounting business of Thomson Reuters, said until more events unfold, it is not known exactly when a loss would be allowed for General Motors Corp. stock that continues to be held until after bankruptcy was declared. Investors still could take a tax loss if they sold the stock, of course.
Massey noted that a corporation’s stock may continue to have value even after a bankruptcy filing, if the corporation continues to operate and the stock continues to trade.
If a stock becomes completely worthless, he said, you can claim a loss equal to your basis in the stock, generally what you paid for it. The stock is treated as though it had been sold on the last day of the tax year. This date is important, because it affects whether your capital loss is long-term or short-term. Massey said it must be stressed that you can take the loss only in the year the stock becomes worthless.
What if you discover that a stock you own has become worthless after you have filed your tax return that year?
In that case, your tax return for that year must be amended. This can be done for seven years from the date your original return for that year had to be filed, or two years from the date you paid the tax, whichever is later.
Who determines if a stock is worthless?
There is no easy answer. If a stock still trades for even pennies, it is not worthless. For example, Washington Mutual Bank, which was seized by federal regulators and sold to Chase, still trades under the symbol WAMUQ. PK (in the pink sheet listings) for about 10 cents a share.
Log into MyBuffalo to post a comment
MyBuffalo is the new social network from Buffalo.com. Your MyBuffalo account lets you comment on and rate stories at buffalonews.com. You can also head over to mybuffalo.com to share your blog posts, stories, photos, and videos with the community. Join now or learn more.
Reader comments