You can enter the 1099-MISC for the income and then a negative entry for the loss of value.
Be sure to then adjust your basis when you sell or dispose of the asset.
Sign into your account and return. Click the “Pick up where I left off” bar
Click on Federal on the left side-bar, then Wages & Income along the top.
When you get to the Income section, (you may need to click "Show All Income" first) Scroll down to Other Common Income and Click Show more
Click Start or Revisit for Form 1099-MISC PAST SELF-EMPLOYMENT
Enter a description for the non-work income, such as “Settlement Payment” for the reason and Continue
Click “None of these apply.” at the bottom of the list for “Does one of these uncommon situations apply? And Continue
Answer “No, it didn’t involve work like my main job.” on the next screen and Continue.
Click the year you got the reward and Continue
Answer “No, it didn’t involve an intent to earn money.” on the next screen and continue.
Do you have another 1099-MISC? Click No and Continue
Click Done.
The income will show as a line item on line 7a of your 1040 and not as Self-employment.
Next, make the adjustment for the reduction in value (basis)
Click on Federal,,,Wages & Income,,,,scroll down to the last section "Less Common Income"
Scroll down to the last choice "Miscellaneous Income, 1099-A 1099-C" and Start
Scroll down to the last choice "Other reportable income" and Start
For the Description enter "Loss in value"
Enter the amount AS A NEGATIVE NUMBER
(remember that you are also reducing the basis in your property by this amount.)
Click Continue and Done
The 1099-MISC and your adjustment will show on line 7a the 1040.
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