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Subject:   Stock Options w/ Bankrupt Company?
Date:   Mon, 21 June 2004
From:   Kelly

A former employer gave me both incentive stock options and nonqualified stock options and then filed chapter 11. The company will probably soon file chapter 7. I didn't exercise the options. Is there any way I can claim a tax deduction for the worthless stock options?

Thanks,
Kelly

Answer

Date:   Fri, 02 Jul 2004

Hello Kelly,

No. Since you never reported any taxable income for receiving the options and made no cash investment in them, you have no tax basis or investment to deduct.

Good luck!

Mike Gray

For more information about non-qualified stock options, request our free report, Non-Qualified Stock Options - Executive Tax and Financial Planning Strategies.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.