1099 MISC received for the recovery of a portion of an investment where the company filed Chapter 11. The loss was far greater than the recovery. How do I properly show the recovery was a net loss?

[mikelb]

In addition, the initial investment was made using "post tax dollars" and the recovery was 41% of the original investment. TT seems to want to add the entire recovery as taxable income.

[mikelb]

Should this recovery be taxable? How do I show this was a 41% return of the initial investment  made with post tax dollars and a corresponding 59% loss?

[HelenC12 · Accepted solution]

You need to enter this in the Investment section of TurboTax. Delete the 1099-MISC form that you entered. 

As long as you did not report the loss in a previous year, you'll be able to claim the 59% loss on your income tax return.

• However, you can deduct a net loss of up to $3,000 ($1,500 if married filing separately).
• Any capital loss you couldn't deduct this year can be carried forward and deducted on future tax returns as a capital loss carryover.

To enter your investment, follow these instructions:

1. Open or continue your return in TurboTax.
2. In the search box, search for investment sales and select the Jump to link in the search results.
3. Answer Yes on the Did you sell any stocks, mutual funds, bonds, or other investments in 2019? screen.
   • If you land on the Here's the info we have for these investment sales screen, select Add More Sales.
4. Answer No to the 1099-B question.
5. On the Tell us more about this sale screen, enter the name of the person or institution that brokered the sale.
6. On the next screen, select Other and answer the questions to finish entering your sale.