Level 7

Question

client's stock losses due to a broker's bankruptcy

Forum|Forum|1 year ago
December 28, 2024
4 replies
14 views

Before I set on, just a note of thanks for all the help community members have given to those who always have questions.

How should a client's stock losses due to a broker's bankruptcy be reported on their tax return, and are there any specific IRS rules or forms to consider?

ProSeries Professional

This topic has been closed for replies.

Jim-from-Ohio

Intuit Community Champion

What was the nature of the loss? Stock went to zero or money just gone? Wasn't the account covered by the clearing house.. Pershing, National Financial Services, etc.

HOPE2Author

Level 7

Yes, Puxin Ltd is considered bankrupt as of April 2022, when a Cayman Islands court ordered the company to be wound up following a creditors' petition, effectively placing it in liquidation.

Key points about Puxin Ltd's bankruptcy:

Court order: The Grand Court of the Cayman Islands issued a winding-up order against Puxin Ltd.
Reason: A creditors' petition was filed against the company.
Status: Currently considered in official liquidation.

abctax55

Level 15

So..... in what year should this loss be reported? 2022? 2023? 2024? @HOPE2 What year tax return are you working on?

HumanKind... Be Both

George4Tacks

Level 15

The stocks are possibly still there. The SEC will often step in and take care of the investor as best they can. You (or the client) need to do more research.

https://www.investopedia.com/articles/investing/050515/what-happens-when-stock-broker-goes-bust.asp#:~:text=If%20a%20brokerage%20fails%2C%20another,held%20at%20a%20brokerage%20firm.

Answers are easy. Questions are hard!

Skylane

Intuit Community Champion

In general, you can’t take a loss on a stock until it is sold or declared worthless.

If at first you don’t succeed…..find a workaround

Accountant-Man

Level 13

Should this be a theft loss?

** I'm still a champion... of the world! Even without The Lounge.

BobKamman

Level 15

@Accountant-Man wrote:

Should this be a theft loss?

Companies go out of business all the time. This was a high flyer, if you wanted to risk investing in a Chinese private education business, this was the place to do it. If the client thinks it's the broker's fault, then consider a FINRA claim for inappropriate advice.

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