Zev is entitled to a worthless stock deduction after the company declared bankruptcy and eventually was liquidated. But of course not all bankruptcies end in liquidation. As you know from BLAW, many bankruptcies are the reorganization type (Chapter 11) i.e., the company comes out the oth-er side with a restructured balance sheet and life goes on. And even though com-mon stockholders are at the back of the line in terms of priority, sometimes their stock does not become worthless. Lose some value? For sure. Lose all value, down to zero? No.

What would have been the FIT result in this example if Zevs stock lost some val-ue but never became completely worthless? Assume that Zev had paid $40 per share for his 500 shares. Also assume that, although trading in the stock was halted temporarily, it quickly resumed. Assume that the value of Zevs stock fell as far (but only as far) as $7 per share, and that he still owns it.