1099-B with Unknown term and $0 cost and $0 Proceeds. Do I have to report?

[BIllMc-5809]

I  received 141 contingent dividend shares of a holding company at no cost to me and as part of a bankruptcy settlement with the issuing company. The shares were "locked" (couldn't sell them/no market.). In 2025, the shares  became worthless.

I tried entering this 1099-B as indicated in the screenshot.  When I do an error check, Turbotax says I need to enter a holding period.  It also says I need manually file a copy of the 1099 with the IRS using form 8453 or by mailing the 1099.

My question is, do I even need to report this 1099 info since there is no sales proceed and the cost is $0 and the holding period is unknown?  Alternatively, should I just select short term/uncovered, as that would maximize cap gain, if there was actually a capital gain? 

Thanks ~BillLine from 1099-B

Turbotax Interview

[BIllMc-5809]

Any thoughts on this question?

[JamesG1]

Your financial institution may report transactions where one or more data elements are unknown by the institution and cannot be reported.

In such a case, you have to determine cost basis from your own records.  For instance, if you purchased the investment, the cost basis is what you paid for it.

At the time that you received the shares and received a report from the bankruptcy court, what value were you told that the shares held?  

You may have held some investment that then precipitated your involvement in the bankruptcy proceeding.  What was your cost basis in that investment?

Were the shares received in a bankruptcy settlement that took place in 2025?  Or at an earlier date?  This date may give you a idea whether the investment should be reported as held on a long-term or short-term basis.

In addition, you might ask the broker if they have any information about the acquisition date and purchase price. Sometimes they have the information, even though they do not report it on the IRS form 1099-B which they issue.

[BIllMc-5809]

Thanks for your input.  The shares were distributed absent consideration.  Because the issuing company was bankrupt, the court ultimately determined that the shares were fraudulently issued.  As such, the shares needed to be returned to the issuer  As an incentive to participate in the claw-back,  shareholders were told they would receive $2 for each share returned.  So ... the shares are gone and the $2/share has not been paid.  Fidelity (my broker at the time) reported the shares as sold with $0 proceeds (and $0 cost).  I'm just wondering if I need to report this transaction at all!

[RogerD1 · Accepted solution]

You should report the information from the 1099-B on your tax return for 2025, even though there is no tax consequence (because you had no basis in the shares and got nothing for them).  The 2 sections you have there look to be correct, but for the Sales info section in between you should include the Description of the securities.  Does the 1099-B have acquisition dates for the shares?  This should be reported by the broker, but if the shares were acquired on more than 1 date, you can select the button by Something other than a date and report "Various".  Since the shared became worthless in 2025, you can use the date provided on the 1099-B, but if not available, use 12/31/2025.

Once you enter than information, the next page states, "Let us know if any of these situations apply to this sale" and you can select "This was a worthless security".

On the cost basis screen that follows you can select "I don't want to make any changes . . .".

On the next screen, you'll need to establish if the shares are short term (one year or less from the date your receive the shares) or long term (over one year).

Please be sure to retain proof that the shares were worthless, such as bankruptcy filings, news articles, etc.

Should you receive the $2/share that you were promised in 2026, you could report that income in 2026.