Do I have to claim the amount on a 1099 -Misc for an investment that i made

[Kelli_p]

I made an investment in 2018 and shortly there after the company filed bankrupt.  It has been held up in court proceedings for almost 2 years and in December of 2019 I received a portion of my original investment back.  A far cry from the original investment.  I have not received any interest on the money, so why do I have to claim the amount on the 1099-Mics?   Where do I put the original amount to show that I have a loss?

Thank you, 

Kelli_p

[DavidS127]

Assuming the proceeds from the court case reported to you on Form 1099-MISC are solely for the loss in the value of your investment, it does not need to be reported on your tax return.  Instead, it reduces your "basis" (net investment) in the investment you made.

Report the disposition of your remaining investment using the path Federal>>Income & Expenses>>Stocks, Mutual Funds, Bonds, Other.  When you add the "sale", it will ask you if you did or will receive a Form 1099-B.  When you answer "No", TurboTax will walk you through the entry of the disposition of your asset.  Report "zero" for the "Proceeds", and report your net investment (after the court payment) in the "Cost or Other Basis".  Use the date of the court ruling as the "Date sold or disposed".

If the Form 1099-MISC reports payments for something other than loss in the value of your investment, it may be taxable.  Refer to IRS Publication 4345 at this link for a summary of the tax implications of a lawsuit settle...t for guidance on whether the payment is taxable.

[max90066]

Does this pertain to 1099-Misc where box 3 is checked?  I recouped a portion of original investment from a company that went bankrupt.  Can you please clarify if box 3 is considered in your description? thank you so much.

[KarenM90]

Yes, you may need to report that on your return.  

If the funds received were part of a lawsuit settlement you would reduce the basis of the investment as indicated above in DavidS127 answer:

Assuming the proceeds from the court case reported to you on Form 1099-MISC are solely for the loss in the value of your investment, it does not need to be reported on your tax return.  Instead, it reduces your "basis" (net investment) in the investment you made.

Report the disposition of your remaining investment using the path Federal>>Income & Expenses>>Stocks, Mutual Funds, Bonds, Other.  When you add the "sale", it will ask you if you did or will receive a Form 1099-B.  When you answer "No", TurboTax will walk you through the entry of the disposition of your asset.  Report "zero" for the "Proceeds", and report your net investment (after the court payment) in the "Cost or Other Basis".  Use the date of the court ruling as the "Date sold or disposed".

If the Form 1099-MISC reports payments for something other than loss in the value of your investment, it may be taxable.  Refer to IRS Publication 4345 at this link for a summary of the tax implications of a lawsuit settle...t for guidance on whether the payment is taxable.

However, if you have a totally worthless investment you may be able to claim that as a capital loss.  Here is a TurboTax Help Topic on Reporting worthless investments:Worthless Investments  If the 1099 received represents a "portion of the original investment" as you indicated, you can consider the 1099 as the "sales price" for purposes of your Captial loss and the amount you paid for the investment as your cost basis.  

Please be aware however, that you could still receive a notice from IRS advising you that you did not report the additional 1099 Income.  You would need to respond to the notice with a copy of your Schedule D showing that the 1099 income was claimed and an explanation of the transaction.

[Hal_Al]

As others have said, you report this as a sale of an investment at  Federal>>Income & Expenses>>Stocks, Mutual Funds, Bonds, Other. 

Your problem is that you have an erroneous 1099-Misc that  the IRS gets a copy of and will expect it to show up on your return (regardless of which box [it's usually box 3] it shows up in).

If you received an erroneous 1099-Misc, you have several choices:

1. Ideally, you get a corrected 1099-misc from the payer (not likely in your case)
2. Don't report it on your return. Attach a copy of the 1099 and a statement explaining the circumstances. You can't e-file. From the IRS instructions for form 1099-Misc: Form 1099-MISC incorrect? If this form is incorrect or has been issued in error, contact the payer. If you cannot get this form corrected, attach an explanation to your tax return and report your income correctly. The explanation should include that fact that it's reported on schedule 8949 investment sales, on your tax return.
3. Report the income as other income on line 8 Schedule 1  (enter in TurboTax at the 1099-Misc screen) . Then enter a line 8 deduction, for the same amount. In TurboTax (TT), enter at:
   - Federal Taxes tab
    - Wages & Income
   Scroll down to:
   -Less Common Income
         -Misc Income, 1099-A, 1099-C
          - On the next screen, choose – Other reportable income - Enter the number with a minus sign              (-) in front. Briefly explain at description.
4. Do nothing and hope you can explain it away when & if the IRS contacts you