Some people suggest that the unrecoverable basis can be reported as negative Other income based on IRS guidance that predates the introduction into the tax code the section on miscellaneous deductions subject to the 2%-of-AGI floor which I think should apply instead; treating this as a miscellaneous deduction subject to the 2%-of-AGI floor would be treating it the same as what the IRS requires for unrecoverable basis from Roth IRAs. However, the Tax Cuts and Jobs Act of 2017 has suspended such miscellaneous deductions through 2025.
Another school of thought is that this presently unrecoverable basis has been rolled over to the Roth IRA along with the rest of the rollover to the Roth IRA and the code 1B Form 1099-R could be reported as rolled over.
I have no idea which, if any, of these approaches the IRS would find acceptable.
