Chapter 8: Other Deductions, Penalties, and Loss Disallowance

01.Core Concepts

• Loss deduction allowed for securities that become worthless during the year. • Artificial Sale Date: Last day of the year in which the securities became worthless • For individuals (cash-basis taxpayers), this is December 31st • Causes holding period to be long-term unless the security was purchased during the year it became worthless or on the last day of the preceding year.