Worthless Stock For Corporate Employees

Healthcare Provider Update: Healthcare Provider for Regal Rexnord: Regal Rexnord Corporation typically engages with a variety of healthcare providers for its employee health benefits. While specific healthcare providers can vary based on employee location and health plan selections, Regal Rexnord often collaborates with networks that include major insurers such as UnitedHealthcare, Anthem, and Cigna to offer comprehensive healthcare coverage for its employees. Healthcare Cost Increases in 2026: As 2026 approaches, Regal Rexnord, like many companies, may face significant increases in healthcare costs, primarily driven by anticipated hikes in ACA marketplace premiums. Reports indicate that some states are bracing for premium increases that could surpass 60%, largely due to factors such as rising medical costs, the expected end of enhanced federal premium subsidies, and aggressive rate adjustments by major insurers. This perfect storm of escalating costs could translate to a staggering increase in out-of-pocket healthcare expenses for consumers, impacting both employees and the overall budget for employers like Regal Rexnord. As a proactive measure, the company should consider strategies to mitigate these financial impacts for its workforce. Click here to learn more

What Is It

It's important that our Regal Rexnord clients know about worthless stock. First, let's start with the basics — What is it? As the name implies, worthless stock has no securities market value. A company's stock becomes worthless when the company ceases operations or liquidates its assets. A company's stock is not worthless if the stock is still trading, even if only for pennies. Taxpayers may deduct the loss from totally worthless stock, but no loss deduction is allowed for a mere decrease in the value of a security. Taxpayers who take a loss deduction for worthless stock must be prepared to prove to the IRS that the shares are really worthless. IRS Publication 550 includes more information about recognizing capital gains and losses.

Tip:  Writing off worthless securities can be extremely complex. If your position is substantial, you might consider consulting a tax professional to ensure you don't make any missteps.

Caution:  A company that is in bankruptcy may not be defunct. Its stock may still be trading and, in fact, may retain some or all of its value.

When Can A Taxpayer Deduct A Loss For Stock That Is Worthless?

The Company Liquidates Its Assets and Issues a 1099-DIV

When a company liquidates, shareholders may receive a Form 1099-DIV at the end of the year that shows the liquidating distribution made to them during that year. For tax purposes, shareholders should treat this distribution as if they had sold the stock. The date of sale is the date of the distribution. To calculate any loss (short-term or long-term), shareholders should subtract their cost basis in the stock from the amount of the distribution.

Obtain Documentation That the Stock Was Worthless

If the company does not liquidate and you do not receive a 1099-DIV--and it's highly likely you won't--stockholders may still take a loss deduction for worthless stock if they obtain proof acceptable to the IRS that the stock had no value at some point in time during the year in which the deduction is taken. Examples of such proof include a letter from the company that states it has shut down and there are no assets to pay shareholders or a letter from a broker that states the stock has been delisted and no longer has value. On his or her tax return, the shareholder should state the date of sale as December 31 of the year in which the stock became worthless. The sale price is 0 or 'worthless.'

Caution:  A shareholder may deduct a loss for worthless stock only in the tax year the stock became worthless. It is essential that the shareholder declares (and can prove) this event in the correct year. However, if necessary, the shareholder can file an amended return (Form 1040X). Taxpayers have seven years to do so, unlike the usual three years for most Form 1040X filings.

Abandoning a Stock

We'd also like our Regal Rexnord clients to know that you may also be able to claim a stock as worthless if you abandoned it after March 12, 2008. To do so, you must relinquish all rights to it and receive nothing in return; however, these Regal Rexnord employees should consult a tax professional to ensure that the transaction is not considered a sale, exchange, contribution to capital, dividend, or gift, which could change the tax implications.

What If Shares That Are Declared Worthless Regain Value?

If a loss deduction is taken for worthless stock and that stock regains value, the taxpayer need not amend his or her tax return—he or she simply uses the worthless date as the acquisition date and 0 as the cost basis.

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How Can You Find Out If A Stock Is Worthless?

Many of our Regal Rexnord clients may be wondering how you can tell if a stock is worthless. Several stock-tracing firms research obsolete securities to determine whether they have any current value in the financial markets. These firms typically charge anywhere from $30 to $100 for each company they research. Discounts may be available if a shareholder needs a number of certificates researched, or he or she might receive a refund if the firm is unable to find any information. We suggest these Regal Rexnord clients find a stock-tracing firm, look in the telephone directory, contact the stockbroker, or search the Internet.

What If A Stock Is Worth Almost Nothing?

If a stock is no longer traded but is not formally defunct, there's another (though more complicated) possibility for milking tax value from an investing mistake. You could sell the shares in an arm's length transaction (to a willing, unrelated buyer for fair value). Be sure that ownership of the shares transfers to the new owner. You also could check with your brokerage firm to see whether it purchases virtually worthless shares from customers for a nominal amount in order to supply them with a trade confirmation for tax purposes.

Antique Stock Certificates May Have Collector Value

There is a market for antique stock certificates, so for any Regal Rexnord employees who have certificates of stock that turn out to be worthless, don't throw them away. The hobby of collecting old stocks (and bonds) is called scripophily. Most worthless stock over 70 years old has some collector value. Many of the firms that trace old stock certificates also are aware of whatever potential collector value a certificate might have.