RECOGNITION EVENT WORTHLESS SECURITIES:
01.Core Concepts
EXAMPLE On December 28 of last year, Jasmine purchased 1,000 shares in Jafar Industries, Inc. The company declared bankruptcy on January 5 of the current year, and the security became worthless. For federal income tax purposes, when a security becomes worthless, a constructive sale occurs on December 31 of that year. Therefore, Jasmine will have a recognition event due to the bankruptcy of Jafar Industries, Inc. as of December 31 of the current year.