Penny Stock Brokers
Can I claim a defunct stock that has ceased to trade for tax deduction purposes?
An example would be the bankrupt Circuit City or Over The Counter or Penny Stocks. If yes, how long do I have to claim it? Does it have to be a certain period when it became defunct?
Yes, you can claim a capital loss on a stock that has become worthless. My understanding is that you have to claim it in the year that the stock became worthless. That doesn’t mean when the company declared bankruptcy because sometimes a stock will still trade for a penny or two a share for awhile after the bankruptcy declaration. Your broker might be able to help you determine when the shares became worthless. If the stock is still trading for a penny or two a share, your broker might be willing to sell them for you and only charge a commission equal to the value of the stock (so you don’t have to pay more in commission than the stock is worth.
There is a lot of information about this situation that might be helpful in the following article from a few years ago (and the other articles it links to): http://www.bankrate.com/finance/money-guides/taking-tax-advantage-of-a-worthless-stock.aspx