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.

If you've been trying to get clarification from the IRS on how to handle these bank failure investments, good luck getting through to anyone! I spent WEEKS trying to reach someone at the IRS about a similar issue with Silicon Valley Bank shares. Eventually I found Claimyr (https://claimyr.com) which got me through to an actual IRS agent in under 45 minutes instead of the hours I was spending on hold before giving up. They have this cool demo video (https://youtu.be/_kiP6q8DX5c) showing how it works. Basically they use some kind of technology to navigate the IRS phone system for you and then call you when an agent is actually on the line. The IRS agent I spoke with confirmed that I could claim my bank shares as worthless securities in the year they became worthless and gave me the exact procedure.

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.

I went through a similar situation with Washington Mutual back in 2008, so I understand the confusion. The key thing to remember is that bank failures are treated differently than regular stock worthlessness for tax purposes. Since you mentioned your shares still show some value ($4 vs your $5.5k investment), this suggests you likely received some minimal compensation in the JPMorgan acquisition rather than having truly worthless securities. This is actually the most common scenario for retail shareholders in bank failures. Here's what I'd recommend: First, contact your broker and ask for the "corporate action statement" for First Republic Bank from May 2023. This will show exactly what happened to your shares - whether they were converted to JPMorgan stock, cash, or some combination. Most retail shareholders received a small cash payment (often around $0.10-0.50 per share) as part of the acquisition. If you did receive compensation, you'll report this as a regular stock sale on Schedule D using May 1, 2023 as the sale date, your original purchase price as the cost basis, and whatever amount you received as the proceeds. The loss will be the difference. For the limit order issue - if your account shows $4 total value, try setting your limit price at $0.01 per share or whatever the current bid price shows. This should execute immediately and give you the realized loss you need for your tax return. Don't use the "worthless security" provision unless your shares truly received zero compensation, as the IRS scrutinizes these claims heavily.

I've been dealing with a similar situation and wanted to share what I learned from my CPA. The most important thing is to distinguish between a true "worthless security" and a security that was acquired at a minimal value. Based on your description, it sounds like your First Republic shares likely went through the JPMorgan acquisition process rather than becoming truly worthless. Here's what you should do: 1. **Get the facts first**: Call your broker and request the "Corporate Action Notice" for First Republic Bank from May 2023. This will tell you exactly what happened - whether you received cash, JPMorgan shares, or nothing at all. 2. **If you received ANY compensation** (even pennies): This is a regular sale transaction. Use the actual acquisition date, your original cost basis, and whatever you received as proceeds on Schedule D. 3. **For the limit order problem**: Since your shares show $4 value, set your limit price at or below the current bid price (maybe $0.01 per share). This will execute immediately and create the taxable event you need. 4. **Avoid the worthless security claim** unless you truly received zero compensation. The IRS audits these heavily, and if you received even minimal payment, it doesn't qualify. The good news is that either way, you'll be able to claim most of your $5.5k as a capital loss. The documentation from your broker will make everything clear and defensible if questioned.

I went through this exact same situation with my First Republic shares last year, and after working with my tax preparer, here's what we discovered: The key is determining what actually happened during the JPMorgan acquisition. Most retail shareholders of First Republic did receive some minimal compensation - often around $0.00-$0.50 per share - rather than having truly "worthless" securities. Since your shares still show $4 value in your account, this strongly suggests you received something in the acquisition process. Here's my recommendation: 1. **Contact your broker immediately** and ask for the "Corporate Action Statement" or "Reorganization Details" for First Republic Bank from May 1, 2023. This document will show exactly what you received. 2. **For your limit order issue**: Set your limit price at $0.01 per share (or whatever minimal amount ensures execution). Since your total position is only worth $4, this will execute immediately and give you the realized loss you need. 3. **Report it as a regular sale on Schedule D**: Use May 1, 2023 as the sale date, your original $5.5k as the cost basis, and whatever minimal amount you received as proceeds. 4. **Avoid claiming "worthless securities"** unless you truly received $0. The IRS heavily audits these claims, and if you received any compensation (even pennies), it doesn't qualify. The bottom line: You'll still be able to claim nearly your entire $5.5k loss as a capital loss, but make sure you have proper documentation from your broker first. Don't let the complexity paralyze you - this is actually a fairly straightforward transaction once you get the right paperwork.