The SEC froze a mutual fund purchased through Schwab and regulated under the 1940 Act because the CFO is believed to have been adjusting the value of certain securities within the fund. What a mess. The SEC ordered the fund to liquidate all its assets and develop a distribution plan. The plan of distribution was approved by the SEC and the fund is planning to distribute 40 percent of the available assets back to shareholders on a pro-rata basis. The remaining 60 percent of the cash (liquidated assets) will be held by the funds until it can determine what its liabilities are and defend all litigation and class actions...The fund was frozen on February 2021.
Any thoughts on how to manage the loss on the investment in this tax year 2021? I know: (i) the amount or basis of my investments in this fund; (ii) the value of the investments on the day it was frozen; and (iii) the amount of funds I will receive at the end of November 2021.
How to treat the cash received in the liquidating distribution? is it income? long-term capital gain (I invested in 2017/2018)? Is it offset by the loss?
Thank you in advance
