Investors in both stocks and bonds have been groaning about the worthlessness of some investments for almost two years now. But the Internal Revenue Service has a strict definition of "worthless" that you'll need to meet before claiming a deduction for your worthless securities.Surely it's small consolation to investors in WorldCom or Enron. According to the tax code, investors are able to claim a loss for the cost basis (what you paid for the stocks or bonds) in the year that the securities become worthless. The loss is claimed on Schedule D of your 1040. As with a loss on any security, you can't claim your "paper gain," you can only deduct as a loss the money you actually plunked down to purchase the stocks or bonds. (A quick aside: The tax code doesn't allow you to deduct losses incurred in a tax-deferred account such as an IRA or a 401(k) plan.) To claim a deduction for worthless stock or bonds, though, you must be able to prove that the securities became completely worthless. Now, euphemistically, WorldCom and Enron shares certainly seem like they're worthless -- now trading around 15 cents per share -- but the IRS would disagree. After all, 100 shares will still get you ... well, a movie and some popcorn. In other words, a company's bankruptcy, criminal indictments of the executives, or the delisting of its stock won't make your investments worthless in the eyes of the IRS. To prove total worthlessness, investors need to prove that the securities truly have zero value. For instance, a company declared bankruptcy, stopped doing business and is insolvent. If the company's shares are still trading -- even at pennies per share -- they're not considered worthless, and no deduction will be granted. Nor can you claim a deduction for a partially worthless corporate bond.