I hold some shares of a company in a discount broker account that has recently declared bankruptcy to allow for reorganization and is trading on the Pink Sheets, what are my options for dealing shares? Should I hold them in hopes that the company might regain value in the future, or cut my losses and sell off the shares? Also, what happens in the event that the are liquidated and I still hold (now worthless) shares in my account?
Well, so long as the shares trade they are valued at greater than "worthless." An important distinction. If truly worthless, you indicate a sell date of the day they were deemed worthless, and a sale price of zero. In your case, the broker should sell the shares for you. If the bid is zero and ask, say .1 cent, the broker should offer a courtesy purchase, i.e. they take the shares, so you can claim the loss.
This loss is used to offset gains from other stocks you sold, if it's greater than the gains, you take a $3000 loss again ordinary income and carry the rest forward, until you use it up against gains or $3000 each year.