How do you report capital loss on stocks from companies that went bankrupt and went away? Like Enron?

You need to find out exactly when the stock was declaired worthless and amend your taxes back to the year the declaration was officially made. You can only take up to $3000 a year, but if you had more than that, you apply it to the next year and the next until it is all used up. It can be used to offset gains as well, so you can use more than $3000 of loss in those years. You need to hurry though, cause you only get to claim refunds for the last three tax years. See a professional tax preparer if you are unsure on how to amend your return or apply the rules. Hurry, though, cause they are all about to get very busy!

If the company went bankrupt you should request a letter from your broker to that effect if they haven't sent one already. The loss is reported on Sched D in the year the company went under, using your cost basis as the purchase price and $0.00 for the selling price. This will generate a total loss which can be used to offset any gains for that year and up to an additional $3,000 in loss, which is the maximum per year. Any loss not used can be carried forward each year until it is all used up.

In some cases, companies do not go bankrupt, but their stock becomes worthless or untradeable. In that case you actually have to attempt to sell it and have your broker tell you there is no market. That information will also allow you to claim the loss on your return for that year.

Hope this helps, I can always use a best answer.

Have a great New Year

And worthless securities extend the time frame for amending a tax return.

From an online article:

Enron stock was officially canceled on November 17, 2004, when the company went into bankruptcy. On its Web site, the company states that "we do not expect that distributions will ever be made to the former holders of Enron Corp. stock." That should be enough to satisfy the IRS.

Even if it had been a year earlier not a problem. The 1040X statute for worthless securities is 7 years not 3 so you have until 4/15/2012 to file. However, if you end up with a loss that requires you to amend 2005 and 2006 I wouldn't wait that long.

If you can show the stock has no value just show it as disposed of on 12/31 for no value. My broker will make a courtesy buy of anything in a client's holdings for $1 so that there is a formal sale documented. Check with yours.