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Old 04-11-2016, 09:04 PM
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Red face stock market loss, what to do

I lost around 35K in the stock market after the company I had invested in went belly up and filed for bankruptcy in 2015.
I would like to deduct some of it on my 2016 taxes. I was told by an accountant that after receiving the 1099 form from my online brokerage I can probably deduct up to $3K each year or if the initial capitalization of the company was less than $1,000,000 then I could probably deduct all of it.
My question now is, how do I find that information?
The company's original name was Augme Technologies and it is called Hipcricket.

any guidance? thank you in advance

javtax



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Old 04-11-2016, 10:41 PM
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Originally Posted by javtax View Post
I lost around 35K in the stock market after the company I had invested in went belly up and filed for bankruptcy in 2015.
I would like to deduct some of it on my 2016 taxes. I was told by an accountant that after receiving the 1099 form from my online brokerage I can probably deduct up to $3K each year or if the initial capitalization of the company was less than $1,000,000 then I could probably deduct all of it.
My question now is, how do I find that information?
The company's original name was Augme Technologies and it is called Hipcricket.

any guidance? thank you in advance

javtax
filing for bankruptcy protection means that the company is in such rough shape that it would probably be delisted from the major exchanges such as the Nasdaqor the New York Stock Exchange and relisted on the pink sheets or the Over-The-Counter Bulletin Board .Since you own stock that has become worthless because the company went bankrupt and was liquidated, then you can take a total capital loss on the stock. However, the IRS wants to know on what basis the value of the stock was determined as zero or worthless. Therefore, you should keep some kind of documentation of the zero value of the stock, as well as documentation of when it became worthless. Basically, any documentation that shows the impossibility of the stock offering any positive return is sufficient. Acceptable documentation shows nonexistence of the company, canceled stock certificates or evidence the stock is no longer traded anywhere. Some companies that go bankrupt allow you to sell them back their stock for a penny. This proves you have no further equity interest in the company and documents what is essentially a total loss.
If you can't find information in the newspaper or the library, or you haven't received any correspondence from the company, you may call the person who sold you the investment If the company is in Chapter 7, and has not filed reports with the SEC, or you need more information, the bankruptcy court itself is another source. This court is usually located where the company has its main place of business or where the company is incorporated. (There is at least one bankruptcy court in each state and the District of Columbia.) Once you know a company's main place of business or state of incorporation, you can obtain the address and phone number of the bankruptcy court for that region by visiting the website of the Office of the United States Courts or by calling (202) 502-1900. Court addresses and phone numbers are also listed in the publication, The American Bench, which you can find at your local library. In addition, you'll find links to U.S. Bankruptcy Court websites at Bankruptcy | United States Courts.
The U.S. Trustee has broad administrative responsibilities in bankruptcy cases. Check the U.S. Trustee's website, your local telephone book, or the public library for the field office closest to you, and contact them for information on the status of the bankruptcy.



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Old 04-14-2016, 08:54 PM
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Thanks for the information.

the company filed chapter 11 and I have all the documentation along with the fact that I sold all of my shares for a few pennies. I do have proof for tax purposes.

I was told that if the stock qualifies for "section 1244 stock" then I can deduct the entire loss in one year Versus a capital loss which limits you to deduct only $3k per year until it is used up.

My question now is, how do I go about finding out if "crappy" stock falls under the category of section 1244 stock.

I have called multiple places and no one knows how to provide an answer. I even went to capital one finance site, I use them to buy stocks, and they didnt know either.





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Old 04-14-2016, 09:13 PM
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Originally Posted by javtax View Post
Thanks for the information.

the company filed chapter 11 and I have all the documentation along with the fact that I sold all of my shares for a few pennies. I do have proof for tax purposes.

I was told that if the stock qualifies for "section 1244 stock" then I can deduct the entire loss in one year Versus a capital loss which limits you to deduct only $3k per year until it is used up.

My question now is, how do I go about finding out if "crappy" stock falls under the category of section 1244 stock.

I have called multiple places and no one knows how to provide an answer. I even went to capital one finance site, I use them to buy stocks, and they didnt know either.



I was told that if the stock qualifies for "section 1244 stock" then I can deduct the entire loss in one year Versus a capital loss which limits you to deduct only $3k per year until it is used up.=========> Under section 1244, your losses treated as capital losses are treated as ordinary losses; Ordinary losses are not limited to $3k per year. Your ordinary losses can be fully deducted in the year of the loss. Ordinary losses offset other sources of income that is taxed at ordinary rates, which can be as high as 39.6% for 2016 I guess. The maximum 1244 loss that can be taken in any year is:$100k for married individuals filing a joint return;
;$50k for all others. To qualify as a section 1244 small business stock, the company must be small. Capital receipts of the company can't be over $1M including the value of any stock previously issued; You must have paid for the stock with money or other property.then, you should report the loss, up to the maximum limitation, on line 10 of Form 4797. You should report any loss in excess of the limit on Sch Dof 1040.



My question now is, how do I go about finding out if "crappy" stock falls under the category of section 1244 stock.=====>>in addition to as said above; As owner of the 1244 stock, you must be an individual, or a partner in a partnership
Most of the company's gross receipts must be from operations. For a period of the corporation's most recent five years ending before the date of the loss, gross receipts from royalties, rents, dividends, interest, annuities, and sales or exchanges of stock or securities must not exceed 50% of the receipts of the company
I have called multiple places and no one knows how to provide an answer. I even went to capital one finance site, I use them to buy stocks, and they didnt know either.========>> Section 1244 of the Internal Revenue Codeprescribes specific requirements for: the corp issuing the small business stock; the stock itself; and the shareholders of the corp. aggregate capital must not exceed $1M at the time the ?1244 stock is issued to its shareholders; Because the rules under sec1244 are complicated, I encourage you to contact your tax advisor, an IRS enrolled agent / a CPA doing taxes in your local area for professional help



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