Are there any tax breaks I can get for worthless stock?
August 9, 2004
Date: Mon, 26 Jul 2004
I have been with a private company for 5 years. 4 years ago, I exercised $8,000 of options in a cashless exercise (on loan from the company at 7% interest). Those options have since suffered a 1000:1 reverse split! Now that I’m leaving the company (tomorrow!), I owe roughly $11,000 to pay off the loan for shares that are worth pennies.
My questions are:
- Is there any way I can get out of paying this money?!!
- Are there any tax breaks I could get (company is still private).
Date: Fri, 30 Jul 2004
- The note is a valid obligation. You do take a risk when you buy stock. If you could persuade the company to forgive the note, it will be taxable income to you.
- Look into having the company redeem your stock or making a private sale to another employee. Then you can claim a capital loss (limited to capital gains plus $3,000).