| This past year has been a brutal one for the stock | | | | So let’s assume for a moment that we are looking |
| market. For many taxpayers, their retirement and | | | | at a loss in a regular (non-retirement) brokerage or |
| brokerage accounts have been cut in half and there | | | | mutual find account. In that case, a bad investment can |
| seems to be no end in sight to America’s financial | | | | only be deducted in the year it is sold or becomes |
| system’s problems. | | | | worthless. If you sell the investment it is easy to |
| A common question I get from my clients is: What can | | | | calculate what your gain or loss is. Your gain or loss is |
| I deduct if my investments go down? The answer | | | | determined by subtracting your purchase cost from |
| depends on the type of investment account you have | | | | your sales price. A tougher situation is the one where |
| and whether you still hold the investment. | | | | you believe the investment has become worthless. |
| To claim a deduction, the investment (assuming it is a | | | | That is the situation for clients of Bernie Madoff in |
| stock or mutual fund) must be held in a taxable | | | | New York or for clients of Stanford Financial Group in |
| brokerage account to be eligible to write off as a loss. | | | | Houston. In that situation the year of loss deductibility |
| This means that all of us that have seen our | | | | may depend on the outcome of Federal investigations |
| retirement accounts go down (like IRA’s SEP’s, | | | | or Bankruptcy Court rulings. Due to the difficulty in |
| or 401K’s) are pretty much out of luck as to | | | | assessing the true time the investment became |
| claiming a loss in those accounts. The IRS’s theory | | | | worthless, it is a good idea to get the help of a tax |
| is that if a gain in the account would be non-taxable, a | | | | professional when claiming this type of loss. |
| loss in the same account is non-deductible. | | | | |