I was reviewing this message log because I am facing the same tax dilemma. My initial investment was for $25,000 and I received a 1099-misc from the bankruptcy proceedings in the amount of $10,000. I agree that this is more of a capital gain/loss transaction, but I can't figure out how to report it using turbotax. The problem I'm having is the $10,000 from the 1099-misc is being reported as "other income" on line 8 of schedule 1. I then use schedule D to report a capital loss of $15,000... it calculates a $3,000 loss for this year with a $12,000 carryover loss. I end up paying taxes on $7,000 of this "other income" that really isn't income to begin with. What am I missing? Is there a way to offset the entire $10,000?
