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Old 02-05-2011, 08:35 AM
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ESOP Plan Tax Question

My company recently was purchased by another company the day before it was to claim bankruptcy. However, my ESOP value went from about $35,000.00 to $0. I lost it all. Can that loss be claimed as a deduction in my income taxes? Thanks,



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Old 02-05-2011, 10:07 PM
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“Can that loss be claimed as a deduction in my income taxes?”----> As your securities must be completely worthless, that is, worth $0, the federal tax code may give you the chance to recoup or recover some of your losses. It does so by giving a tax deduction for worthless securities like yours. You have the responsibility of showing that your securities are worthless; the corporation that issued the securities has no value at the time you claim the deduction, or there's no reasonable expectation that the corporation will have any value in the future, or etc. The decrease in the value of the shares after they have been acquired is a capital loss ( LTCL if you owned the right for more than one year) in the year the shares are sold. Your capital losses are used first to offset capital gains of the same kind, so long-term losses off-set long-term gains. If you don't have any capital gains, or if your capital losses are more than capital gains, you can deduct the capital loss against your other income, I mean ordinary income, up to $3,000 in any tax year. If your overall capital loss is more than $3,000, the excess carries over to the next year.You report worthless securities as a capital loss on Schedule D of your Form 1040.



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