Stock I invested in is now worthless. Is this a bad debt and can I report it as such on my tax return?
Tax Professional Answers
A "qualified small business" is a domestic C corporation, the gross assets of which at all times on or after August 10, 1993 through the issuance of the stock in question do not exceed $50 million (without regard to liabilities). The corporation must be an "active business," rather than simply an investment company. A corporation will fail this requirement if more than 10% of the value of its net assets consists of stock and securities of other corporations (not including that of a subsidiary). In addition, a corporation does not meet this requirement if more than 10% of the total value of its assets consists of real property that is not used in the active conduct of a qualified trade or business. For these purposes, the ownership of, dealing in, or rental of real property is not considered the active conduct of a qualified trade or business.
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