club_cafe: Re: Worldcom

iras1 on

Don't do anything yet. Although WorldCom has announced that the existing common stock will be canceled when it reorganizes and emerges from Chapter 11 it hasn't done so yet. Things may change (although this is highly unlikely).

If you can get your broker to buy the shares from you now for $1 or $.01, you should do so. Your broker will probably reduce his commission so that you will not get any cash in exchange for the nearly worthless shares.

Otherwise, you must wait for the bankruptcy court to announce that the reorganization is effective and the old common stock is canceled. At that time you can enter a sale for $0. If this drags on into 2004, you will have to wait another year to claim the loss.

(Technically, the correct way to document the transaction for tax purposes is to enter the "sale" date as 12/31 and the net proceeds as "worthless".)

Ira Smilovitz

In a message dated 10/09/03 11:51:03 AM Eastern Daylight Time, moeller@bivio.com writes:

Steve A. Hannemann wrote:
> I suspect then we should be able to write the shares off for
> 2003? We have never did this, how is it done in club
> accounting?

First remove the shares from your brokerage account. Ask your
brokerage to buy the shares from you for $0.01. Then record the event
as a sale. The loss will automatically show up on the club's 2003
Schedule D.

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