How to claim investment loss on First Republic Bank stocks that I never sold?

What you're dealing with is a special situation called a "worthless security" claim. Since First Republic Bank was acquired by JPMorgan Chase in May 2023, your shares weren't technically worthless - they were converted to JPMorgan shares at a specific ratio. You have three options: 1. If you received JP Morgan shares in the acquisition, you haven't actually realized a loss yet. Your cost basis transfers to the new shares. 2. If your shares became completely worthless, you can claim them as a capital loss in the year they became worthless (2023). You would report this on Schedule D, using December 31, 2023 as the date of worthlessness and $0 as the sales price. 3. If you're trying to sell shares now through a limit order, you need to look up the current market price of the security and set your limit price at or slightly below that price if you want to sell quickly. Remember that capital losses can offset capital gains plus up to $3,000 of ordinary income per year, with remaining losses carried forward to future years.

After dealing with a similar situation with SVB, I stumbled across this amazing tool called taxr.ai (https://taxr.ai) that literally saved me hours of research and probably thousands in missed deductions. I uploaded my brokerage statements and it automatically identified my worthless securities and showed me exactly how to report them on Schedule D. The tool flagged specific IRS rules about worthless securities and bank failures that I had no idea about - apparently there are special provisions for financial institution failures that can affect how you report the loss. It even generated the exact text I needed to put in the description field of Schedule D to avoid audit flags.

I was super skeptical about taxr.ai at first, but I decided to try it after struggling with my own investment losses from last year. I uploaded my statements from three different brokerages, and within minutes it identified exactly how to handle my worthless securities from both First Republic and a couple of tech stocks that tanked. The most helpful thing was that it explained the difference between "worthless" securities and those that just declined in value but still trade. It generated specific language to use in the description field that referenced the relevant tax code. My accountant was actually impressed with how it handled everything and said it saved us both a ton of time.

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I have to publicly eat my words about Claimyr. After posting my skeptical comment, I was desperate enough to try it for my audit situation. Not only did it work, but I got through to someone in the specific audit department who actually knew what they were talking about! The agent explained that I had a similar situation with worthless securities from another bank failure and walked me through exactly how to document it. She confirmed I should use December 31 of the year the securities became worthless as the sale date on Schedule D, enter $0 for proceeds, and write "Worthless security - [Bank Name]" in the description field. This needs to be done in the tax year when the securities became worthless, which for First Republic would be 2023.

Saw a lot of comments here but wanted to add something important: You need to be careful about the date you claim the security became worthless. For First Republic, the FDIC took it over on May 1, 2023, so technically that would be the date of worthlessness, not December 31. Also, if you received any compensation as part of the JPMorgan acquisition, even pennies on the dollar, you'd need to report that as proceeds rather than $0. The IRS is pretty strict about documentation for worthless security claims because they get abused a lot. I'd recommend either getting documentation from your broker confirming the shares became worthless or have proof you received minimal/no compensation in the acquisition.

Has anyone actually used TurboTax to handle this kind of situation? I'm trying to figure out where exactly to enter this in the software and it's not very clear.

I went through something very similar with my Credit Suisse shares when they collapsed. The key thing I learned is that you need to determine whether you actually received anything in the acquisition or if your shares truly became worthless. For First Republic specifically, most retail shareholders received minimal compensation (often just a few cents per share) when JPMorgan acquired the bank. If this happened to you, you'd report it as an actual sale transaction on Schedule D - use the actual acquisition date (May 1, 2023), your original cost basis as the purchase price, and whatever minimal amount you received as the sale proceeds. However, if your shares genuinely became completely worthless with zero compensation, then you can claim them as worthless securities. The IRS allows you to treat the worthless security as if you sold it on the last day of the tax year it became worthless. Check your brokerage statements from May 2023 carefully - there should be some record of what happened to your First Republic shares. Most brokers sent out detailed notices about the acquisition process. If you can't find this info, call your broker directly - they're required to have records of corporate actions like this. The limit order issue you're having suggests your shares still have some minimal trading value, which means you haven't had a true "worthless security" event yet. You'd need to actually execute that sale to realize the loss for tax purposes.