If you owned stock or a bond as an investor (not as a securities dealer) that became completely worthless in 2012, you may deduct your cost basis for the security as a capital loss, subject to the deduction limit of $3,000 ($1,500 if married filing separately) in excess of capital gains (5.4). The worthless security is treated as sold on the last day of the year, which determines whether the loss is a short-term or long-term capital loss. Report the worthless security in the short-term or long-term section of Form 8949, as applicable (see below). Capital loss treatment applies unless ordinary loss treatment is available for worthless Section 1244 stock (30.13).
A loss of worthless securities is deductible only in the year the securities become completely worthless. If you abandon the securities, the securities are treated as completely worthless under an IRS regulation; see below. The loss may not be deducted in any other year. You may not claim a loss for a partially worthless security. However, if there is a market for it, sell the security and deduct the capital loss.
Because it is sometimes difficult to determine the year in which a security becomes completely worthless, the law allows you to file a refund claim within seven years from the due date of the return for the proper year (the year the security actually became completely worthless), or if later, within two years from the date you paid the tax for that year.