How to record stock that goes to zero

[Christopher Singley]

On Sat, Jan 11, 2014 at 7:37 AM, Tommy Trussell <tommy.trussell at gmail.com>wrote:

> On Tue, Jan 7, 2014 at 10:17 AM, David Carlson
> <david.carlson.417 at gmail.com>wrote:
>
> > On 12/27/2013 4:59 PM, Scott H wrote:
> > > I recently had some stock go to zero (yuck). I couldn't find anything
> in
> > > the documentation about how to record this. I tried to record a "sale"
> > > of all my shares with a share price of $0.00 USD but it won't let me do
> > > that since GnuCash requires a non-zero share value. How should I record
> > > this?
> > >
> > > I'm also not sure how to record the loss itself anyway. For example, do
> > > I create an account called "Expenses:Realized Losses" and record it
> > > there, or do I record it as negative income in "Income:Realized Gains"?
> > > In other words, are all capital gains and losses typically stored in
> one
> > > place? The documentation didn't seem clear about this either. Thanks in
> > > advance.
> >
> > I think that the US IRS is much more likely to accept a write-off if the
> > stock is actually sold.  My broker bought back the stock that he had
> > originally sold me that later tanked for a few cents a share.  That
> > makes a clean report from the brokerage house to support your tax return.
> >
> > David C
> >
>
> If your stock is worth nothing, you will have trouble selling it -- UNLESS
> you have a paper certificate... you can sell the paper to a documents
> collector.
>
> I had several securities that were gifts to me when I was a child that
> became worthless in the past few years. My broker couldn't sell them so she
> wrote me a letter saying they were worthless so I could document a complete
> loss for tax purposes.
>
> I don't know the answer about whether a loss is considered a negative gain
> or a separate category, but you can document it however you need to in
> GnuCash and your tax advisor will know how to handle it.
>
> The answer, as so often, is "it depends on the intended use of your
financial statements".  If your primary purpose is tax reporting, then
you'll want your chart of accounts to match your tax forms as closely as
possible.  For individual US taxpayers, take a good look at Schedule D &
Form 8949 - you'll want to break out separate subaccounts for short term
and capital gains, but there isn't much point in further segregating the
gains from the losses.  However, there is an argument to segregating
long-term capital gain/losses realized on securities purchased prior to tax
year 2011, since that matches brokerage reporting on Form 8949.