My stock options are worthless
Users browsing this forum: Company common stock now worthless from stock options Discuss all general i. Can a private company's stock exercised stock options be claimed as a deduction if it becomes "worthless"?
That is, can I claim a loss the amount paid to exercise the options on this stock even though it was never public and never really had value? Is it simply a matter of filing form and schedule D?
Further background in case it matters: I worked for a private company for many years and was offered stock options during my time there. I left the company but exercised these options and received common stock in the private company before I left -- it wasn't a lot of money and I thought why not take a risk.
Due to a recent acquisition by another private company, these common stock options are not being converted into the parent company's stock and are not receiving any compensation -- they are effectively worthless now, so I guess my gamble didn't pay off.
The wiki has some background info: Tax loss harvesting "What if the stock is worthless?
Stocks, stock rights, and bonds other than those held for sale by a securities dealer that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. This affects whether your capital loss is long term or short term. To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Claiming a Loss for Worthless Securities
Ok, so you exercised your stock options and now own some private company stock, instead of the options. It's common for out of the money options to be worthless in a cash acquisition, in particular if their exercise price is higher than the merger price.
belucydyret.web.fc2.com
However, you should have stock at this point, not options. Shouldn't you be getting the merger consideration for your private stock? That's not going to be worthless. Apparently the common stock is now deemed to be worthless.
Stock options are worthless until sold - Business Insider
I would assume that a capital loss could be claimed on the amount paid to the company when the options were exercised. At least the dollar amounts are well defined as dollars paid and current value zero. I am not familiar with how one establishes when and at what value zero one has "sold" the shares. If you wish to have a little more comfort on the tax basis you can sell the stock to someone friend, coworker, whomever for a dollar and you therefore have some documentation of the value of the sale price.
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