Illiquid Securities Analysis (ORIS)

An illiquid securities analysis finds and documents the realization event for a private position: a worthlessness or abandonment loss under IRC §165, a charitable gift under §170, or a secondary sale. FMV calls it ORIS, Optimized Realization of Illiquid Securities, and delivers a file-ready package the holder's CPA can sign and defend.

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At a glance

Basis: IRC §165 and §170, with Treas. Reg. §1.165-1 through §1.165-5
Prepared by: A credentialed FMV valuation analyst
Deliverable: File-ready analysis (PDF), typically 15 to 25 pages
Used by: Family offices, accounting firms, and financial advisors
Delivered to: The holder, their CPA, and the ordering firm's vault

When it is needed

A startup has wound down, a fund has failed, or an LP stake is stranded, and the loss has never been claimed.
A private position has appreciated well above its basis, and the holder wants to offset gains realized elsewhere.
A CPA needs documented support for a worthlessness, abandonment, or charitable deduction before signing the return.
Refund windows are closing on 2018 to 2021 vintages, and the year of the identifiable event has to be fixed.

What the report contains

Analysis of all four realization paths for the position
Reconstructed adjusted basis from the K-1 history, under §722 and §705
Worthlessness and abandonment evidence file from EDGAR, state filings, and news
Character and loss-limitation analysis covering §752, §1244, and §461(l)
Draft election language, the abandonment letter, and Form 8275 disclosure
Statutory and case authority, with a CPA verification checklist

Last updated October 24, 2026

Four realization paths, screened on every position

Each position is tested against all four treatments. The analysis documents what each one requires and the character of the loss or gain it produces, so the filing position stays with the holder and their CPA.

Worthlessness, §165

An identifiable event in the year, such as a bankruptcy, dissolution, or cessation of business, with no reasonable prospect of recovery and a reconstructed adjusted basis.

Abandonment, §165

An overt act, such as written notice to the general partner or manager, with no consideration and no debt relief. The entity may still exist.

Charitable gift, §170

A gift to a qualified charity, supported by a qualified appraisal and Form 8283. Interests held more than a year are deducted at fair market value.

Secondary sale

A buyer found for the interest, with the cap table, transfer terms, and any right of first refusal reviewed, and a certified valuation to support the price.

Typical engagements

Illustrative. Results depend on the facts of each position.

A wound-down fund stake

A family office holds an LLC interest in a fund with no path to recovery.

Worthlessness documented from court dockets, state filings, and press
Abandonment evidenced as an overt act under Echols
Ordinary character supported where no partnership debt is allocated
Abandonment letter, Form 8275 language, and CPA checklist delivered

An appreciated private position

A private interest has appreciated well above its basis, and the holder wants to offset gains realized elsewhere.

Gift of the interest to a qualified charity analyzed against a sale
Certified fair market value signed within the window the regulation requires
Form 8283 completed, with the donee acknowledgment
The 30% AGI ceiling and five-year carryforward modeled

Who uses it

Accounting firmsCPAs receive a file-ready package that supports the path their client elects. The filing position stays with the CPA.Financial advisorsOrdered for business-owner clients in exit, estate, and liquidity planning.Family officesWound-down startups, failed funds, and stranded LP stakes, turned into documented tax benefit.

Standards and sources

IRC §165(a) and §165(g): Losses when sustained, and worthless securities treated as capital
Treas. Reg. §1.165-2(a) and §1.165-5: The identifiable event, and abandoned corporate stock
Echols and Citron: Abandonment by overt act, and ordinary character without debt relief
IRC §752, §741, §1244, and §461(l): Debt relief, character, and loss limits
IRC §170 and §170(f)(11)(C): The charitable deduction and the qualified appraisal
IRC §6511: Refund windows, including seven years for worthless securities

Documents we need

Purchase agreement, company updates, and correspondence
Adjusted or cost basis, or the K-1 history to rebuild it
Entity type: LLC, C corporation, or S corporation
Tax bracket and annual income, for the benefit estimate

How an engagement works

Share the position
Upload the position's documents to the FMV encrypted data room. It takes less than an hour.
Screen and model
We test all four paths, rebuild basis, assemble the evidence file, and value the interest where needed.
Approve the outcome
You and your CPA review the analysis and choose the path to elect.
Receive the package
The file-ready package goes to your tax advisor, with draft forms and the verification checklist.

Illiquid securities analysis questions

What is an illiquid securities analysis?

An illiquid securities analysis, which FairMarketValue (FMV) calls ORIS, for Optimized Realization of Illiquid Securities, screens a private position against four realization paths: a worthlessness loss and an abandonment loss under IRC §165, a charitable gift under §170, and a secondary sale. FMV documents what each path requires and delivers a file-ready package the holder's CPA can sign.

Who decides which path to take?

The holder and their CPA. FMV documents each path and the evidence it requires, and the CPA renders the filing position.

When is a worthless security deductible?

Under IRC §165(g), a security that becomes wholly worthless during the tax year is treated as sold on the last day of that year. The holder must show an identifiable event, such as a bankruptcy, dissolution, or cessation of business, and no reasonable prospect of recovery. A mere decline in value is not enough.

Can a partnership loss be ordinary rather than capital?

Sometimes. When an LLC interest is abandoned and no partnership debt is allocated to the holder, case law such as Citron supports ordinary character, subject to the §461(l) limit. If the holder is relieved of debt, the loss is treated as a sale and is capital. The analysis tests which applies.

Does a donated private interest need an appraisal?

Yes, above the thresholds. A noncash gift claimed at more than $5,000 generally needs a qualified appraisal, and nonpublicly traded stock needs one above $10,000. FMV adds a certified valuation when the gift requires it.

How far back can a loss be claimed?

Refund claims generally must be filed within three years, but IRC §6511(d)(1) allows seven years for worthless securities. The analysis fixes the year of the identifiable event so the right return can be amended.

What does an illiquid securities analysis require?

The purchase agreement and company updates, the adjusted or cost basis or the K-1 history to rebuild it, the entity type, and the holder's tax bracket and income. Most holders spend less than an hour gathering them.

How is the fee for an illiquid securities analysis set?

One flat fee covers an illiquid securities analysis of a position, quoted up front and never contingent on the tax outcome. A certified valuation is added only when a charitable gift needs a qualified appraisal.