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To: nigel bates who wrote (14111)	5/27/1998 1:44:00 PM
From: SE	Respond to of 17305

nigel, Thanks for the input. I don't believe the IRS lists securities in the US as worthless. I believe it is up to the individual to prove when a security became worthless. Frequently, if the dollars are large enough, we will get a letter from the broker indicating the trading value, or lack thereof, and the fact that commissions would not cover the sale to close out the position. From PUB 550, the IRS's position on worthless securities in a short sale. Short Sales A short sale occurs when you agree to sell property you do not own (or own but do not wish to sell). You make this type of sale in two steps. 1) You sell short. You borrow property and deliver it to a buyer. 2) You close the sale. At a later date, you either buy substantially identical property and deliver it to the lender or make delivery out of property that you held at the time of the sale. You do not realize gain or loss until delivery of property to close the short sale. You will have a capital gain or loss if the property used to close the short sale is a capital asset. Exception if property becomes worthless. A different rule applies if the property sold short becomes substantially worthless. In that case, you must recognize gain as if the short sale were closed when the property became substantially worthless. This does not apply to a short sale of property that became worthless before August 6, 1997. -Scott