Filing a Schedule D long term loss of 40k for bankrupt viatical investment and receiver gives me a 1099 misc for 2300 my portion of recovery. I am still $37,700 down but the irs wants me to declare income of 2300 on line 21. Can I reduce my basis to 37,700 on sch. D and not report on line 21? Maybe the receiver reported incorrectly?
-
-
some taxable earnings
>>Maybe the receiver reported incorrectly?<<
Generally you are responsible for getting your own return right even if somebody else is making a mistake. If you believe a 1099 is wrong, you should try to get the payor to correct it. Otherwise .expect the IRS to ask for clarification. You can use Form 8275 to explain it ahead of time, which may avoid penalties if the IRS disagrees with you.
It will be difficult for you to defend your position without accessing company records controlled by the court. For the small difference in tax on $2300 it's probably not worth much effort, and you have to accept that the receiver knows what he is doing.
Although your overall net return on investment was a loss, it appears that there were some taxable earnings. -
Maybe not
Thanks for the reply. I talked to the receiver and she stated that some investors declared the whole loss as fraud in one year. About 50% are like me and going to reduce the basis with the payment rather than report as income as future payments will never exceed half of total loss. Some are adding a note to the IRS about why not showing on line 21. This is what I am going to do.Comment
Comment