Jimmijazz,

The tax treatment in the U.S. for worthless or abandoned securities is, in a nutshell:

1.- You may write off stock deemed worthless based on certain situations, e.g., the company is in bankruptcy and has no or little prospects of returning any value to the security holders. The tax law works as follows: you may write off the loss as short-term or long-term capital loss (depending on how long you have owned the securities) by assuming that they became worthless at the end of the year the worthless determination is made. One can wait up to seven years to do the write off, but, in this case, you need to amend your tax returns all the way back to when the stock is deemed to have become worthless.

2.- One may also decide to "abandon" the security any time you establish that it has no prospects of future value. In this case, you have to give up all rights to the shares, including the right to determine who would enjoy the benefit if they somehow recovered value.

3.- One may sell the "worthless" security any time (even after the 7 year time limit in 1.- above) and take the tax loss when it is sold. This is one of the premises for the offer to buy the KRY stock we learned about just a couple of weeks ago.

4.- In all cases, the tax law allows you to a) use the short- and long-term capital losses from the worthless / abandoned securities to shield short- and long-term capital gains from the same year, and b) to use the remaining tax loss practically indefinitely to shield your annual tax return for up to $3,000 per year, until it is exhausted.