Stricken Stock - Brief Article

Kiplinger's Personal Finance Magazine, Jan, 2000 by Kimberly Lankford

I own 500 shares of Iridium and was wondering: New that the company has filed for bankruptcy, are the shares considered worthless and can I deduct my loss on my tax return? --MICHAEL BROWN, Columbia, Md.

No, because the stock isn't worthless. Even though Nasdaq halted trading of Iridium when the satellite phone company filed for Chapter 11 bankruptcy protection in August, Iridium has joined the ranks of other penny stocks on the pink sheets--a listing of thinly traded over-the-counter stocks that don't meet the requirements of any exchange. As of mid November, the stock hadn't traded for many days.

Your broker may be able to find a buyer, though commissions could wipe out your proceeds. Some brokers will take unpopular shares off your hands even if they can't sell them. Quick & Reilly and Sure-trade, for example, sometimes pay $1 for the lot. That gives you a sales confirmation for your tax records se you can calculate and document the loss. Better yet, sell the shares over your backyard fence to a neighbor for a nickel and a signed receipt.

You might want to hang on to your shares for a while longer. You have until December 31, 2000, to decide whether to take a loss for the 2000 tax year, and by that time the stock could be worth more. "The belief is that Iridium will probably net resume trading until the restructuring plan has been negotiated and presented to the court," says Andrew Balfour, an Iridium spokesman. "Our expectation is that will take a matter of months rather than years."