Is there a time limit for claiming a loss on worthless stocks [i.e. claiming Enron on 2006 tax return]?

Answer 1

Any claim that a stock is worthless must be made for the year in which the IRS determines that it is worthless. See the link below. You have seven years from the due date of the original return, instead of the usual three, to amend it.

Answer 2

You have to claim the loss in the tax year that the stock becomes worthless. If you learn of that after the tax year is closed or after you have filed, you have to file an ammended return for that year on Form 1040X. It's too late for that with Enron stock.

Addendum: Oops! Looks like Uncle Sugar gives you 7 years to ammend that return. So you might be able to file an ammended return if it was within 7 years. Don't recall the date when Enron stock was declared worthless but if it's been less than 7 years you can file that ammended return. You can't claim it on your 2006 return, though.

Answer 3

I don't think there is. It's not an income, it's an asset, and you can hold it forever if you want.

In order to claim the loss, you have to "dispose" of it. Usually you sell stocks, but if your shares are worthless, you just write them off. I had to look this up for another guy who owned Worldcom (now MCI).

What you do is get the schedual D, and where it asks for the sell price, you right "worthless" and claim the entire price that you paid as a loss.

After that, your loss on the stocks falls into the "netting process" because, even though there's no limit on time for getting rid of it, there is a limit to how much you can claim in losses each year, and that limit depends on other things.