Hackitoff,
Thank you for your reply. I agree that it is hard for me to say that the bond I got in exchange is truly worthless if I have a document stating that at most a 2% recovery is possible.
At the same time, it makes no sense to me that the brokerage has said that the "proceeds" I received from this corporate action transaction are the same as what I paid for the bonds. The post-restructuring bonds are materially different from the bonds I bought originally, and are clearly impaired.
What I'm considering is saying that the "proceeds" I received from the corporate action are 1 to 2% of the face value, and that the accrued market discount is 0. Does this make sense?
My other question, then, is about how to report this. The original transaction was reported to the IRS (as a covered security with LT capital gains). Should I keep the transaction as a covered security, and report different figures for the proceeds and accrued market discount than were sent to the IRS (and leave some comments if I can)?
I have contacted my brokerage more than three weeks ago about this, and have yet to receive a response. I've also tried calling the IRS twice -- both times the line to the Schedule D department has been busy.
