Question I have (had) shares in WAMU and participated in the divident reinvestment program. I have been unable to find out what happened to the shares held in that account. I assume they are gone in a puff of smoke Trying to understand from a tax perspective what this means. Thank you.
Answer Jack, the IRS allows you to recognize a loss on your tax return in a year that you sell stock at a loss or the stock is "deemed worthless." I put that in quotes because it's a term of art in tax law and unfortunately it's not always clear when that occurs.
The easiest solution is to sell the shares and treat it like an ordinary sale. Brokerage firms typically have a process for doing this even if the shares are no longer actively traded. They'll enter a sale for some nominal amount like a penny, and send you a trade confirmation. Then you just report it on Schedule D of your tax return.
Because you hold the shares through a DRIP - if that's what it was - it's a bit harder. I'd call the custodian (Mellon?) and ask if they'll do this type of closing sale transaction. Failing that, you need to determine when the shares are (or were, or will be) "worthless" in the eyes of the IRS. I can't give a specific tax opinion on that kind of question on this website, but here's a very good description of it from the Fairmark site: http://www.fairmark.com/capgain/worthless.htm
