Opus17- Thanks for a very thorough reply. This formerly very reliable insurance company was sold to a now convicted new owner who, according to the Feds, siphoned off between $1B-$2B for his own affiliated investments which crumbled. So, while the Feds are alleging fraud (that trial starts next month), at this juncture it is "only" gross mismanagement of his annuitants' funds. Per your reply: When this goes to liquidation, also next month, we are set to recover all of our original invested capital and some interest. What we will be losing is about $100k in accrued interest, not the original capital investment. So it sounds like I don't have a write-off, as there is no loss of capital (principal).
Even if I did try to claim a loss, the actual return via an IRS refund would only be ~$13k, based on our tax bracket. Defending myself in tax court would cost far more than that.. I do read and understand the tax code, but, yes, this deduction is nebulous, per the code. I guess we'll take the principal and some interest (up to guaranty fund limits), and move on.
Thanks again for your insight!!
