If I own worthless stock, can I at least get a tax deduction?

If you invest in stock that loses its value completely, it is possible to claim this loss as a tax deduction, but you must do so at the correct time and only after making sure that the stock has actually lost all technical value. For example, if the company has declared Chapter 7 bankrtupcy, been liquidated and gone out of existence altogether, it will be considered worthless stock.

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Who gets paid first in a business bankruptcy?

Federal rules regulate the order in which creditors receive payment when a company is liquidated through a business bankruptcy. That order is generally based on who assumed the most risk when issuing money to the company. It’s important to note these are general guidelines established by Sec. 507 of the Bankruptcy Code, which includes various exceptions. For example, secured creditors may actually get bumped down in priority if they fail to file their proof of claim.

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How will I know what’s going on with a business bankruptcy filing of a company that I own stock in?

Sometimes, you may first learn about a business bankruptcy in the news. The company filing business bankruptcy may contact you directly or you may receive information from your broker. You might be asked to vote on the reorganization plan for bankruptcy, although you may not get the full value of your investment back. In fact, sometimes stockholders don’t get anything back, and they don’t get to vote on the bankruptcy plan.

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