Yes, I'm quite sure the bonds are worthless, or close to it. The company went through a bankruptcy restructuring. The new bonds issued are a general unsecured claim. The company made clear that funds were set aside to cover 1 to 2% of the unsecured claims, at best (I have a document from them stating this).
So, I know the bonds will never recover more than 2% of their face value. The likely return is more like zero, in my opinion.
My main concern here is whether characterizing this transaction as one with $0 proceeds and $0 in amortized market discount is correct. I understand that by changing what the brokerage said in the 1099-B, I will attract the interest of the IRS. I don't mind attracting their interest -- as long as I'm sure that I'm right.
