Submitted By: someone
Answered: June 30, 2022 12:18 am

How do I know if stock I’ve been holding is a worthless security?

A worthless security is treated as a capital asset that’s been sold on the last day of the year. As such, it generates a long-term capital loss if you’ve held the stock for more than a year or a short-term capital loss if you’ve held the stock for one year or less. To be treated as a worthless security, it must have a market value of zero, whether publicly traded or privately held. It’s up to a taxpayer to prove the security is worthless, and this isn’t always easy to do since the security may no longer be marketable on any established exchange.

Tax Glossary

Return of capital

A distribution of your investment that is not subject to tax unless the distribution exceeds your investment.

More terms