We had bonds in a company that went bankrupt. As partial payment we received common stock. Can we take a capital loss for the difference between our original purchase price of the bonds and the amount they valued the stock?

ANSWER

The BIDaWIZ Team's Answer:

There's typically not a capital loss recognized in this situation. Per IRS publication 17, you will not have a gain or loss when debt is converted into stock according to a conversion privilege in the bond agreement. However, when you sell the stock, that can certainly be claimed as a capital loss if it is in a lose position at the time of the sale.