1099R with now cost basis

[bbb]

If someone can help me, I can help over 10,000 people who have the same problem.  I got a 1099-r on a fractional interest in a life insurance policy I purchased from life partners, who filed bankruptcy and has since emerged.  Box 1 is complete, Box 2 is yes, Box 7 is seven.  The trustee for the estate collects the death proceeds and then distributes your pro-rata portion.  He says that he doesn't trust the companies books when it comes to cost basis and how much extra you paid in premiums - he further adds, go talk to a tax professional.  Currently I simply enter the 1099-r in turbo and then on line 21 I enter a negative amount for the cost basis.  Can someone tell me how to resolve?  I thank you all in advance

[AJ]

This one caught my interest because I had never encountered anything this. It is common to get a 1099-R with the gross income in block 1 and either a zero or a number in Block 2a. I have never encountered a “yes”. In the case where the provider does not have records to determine the taxable amount for Block 2a, then the “Taxable amount not determined” box is normally marked in Block 2b. The 7 in Block 7 simply indicates a normal distribution.

Since the question has gone unanswered for a few days, I will report what I learned. I looked around to see what I could learn, and I found the February 2018 issue of the Life Partners Position Holder Trust (PHT) investor newsletter. It states that they sent Form 1099-R to report “maturity payments made to Continuing Fractional Holders in 2017 (including investors who successfully completed the Option 4 conversion).” The newsletter also states that as "in the Form 1099s for 2016, the PHT did not determine each investors’ taxable income. Instead, as allowed by IRS regulations, we have reported the total amount paid to each investor. Each individual investor must determine his or her taxable income taking into account all of the costs incurred in purchasing and maintaining the positions, any previous write-offs and the effect, if any, of the transactions required by the Plan.”

So it appears that you are on your own for the basis since they take the position that they can’t know all of your expenses or your previous write-offs. When taxable amounts are not determined, I’ve seen some situations where the taxpayers are instructed to enter the correct taxable amount for the Block 2a entry for the 1099-R. However, the Line 21 method that you describe is also used to correct totals for many situations also. As long as you document your process and get the correct AGI, then I think you should be OK.  

But keep good records. You might need them to defend your numbers.

[jdlacrz]

I'm in the same situation.  How did you ultimately file 2018 tax return. 

[bbb]

in 2018 I use line 21 other income and put in a negative value.  In the description field, I said cost of asset payer id# and entered the trust and then entered my cost basis as a negative number.

this year I will make a sub 1099-r in turbo tax.  Keep good records and we will be ok.  Hope this helped.  

[jdlacrz]

BBB thanks for your reply!

Need to clarify and ask a few more questions if you don't mind.

Are you under the age of 59.5?

Did you Elect Option 4 (Conversion) ?

Pay Catch up premiums?

Re-valuate your policies?

Submit Fair Market Valuation Form?

Submit Distribution Request at the new valuation amount?

Change ownership to Magna Servicing?

Pay taxes on the distributed amount for 2018 tax filing?

I'm in the same situation.  2 Maturities; 1 paid in October 2018 and the other January 2019.  I have no idea how to file on tax return. 

Can you kindly explain how to determine the negative number?  I assume it's a combination of the following:

• Amount paid for policy
• Amount paid at maturity
• Premiums paid

What am I missing?  Can you elaborate on description field where you noted cost of asset payer ID#.  Is that policy number?

You mentioned this year you will produce a Sub 1099-R.  What would that entail? 

Sorry so many questions I would have thought more people would have chimed in given the vast amount of investors.

Is there another way to communicate more personally?

Thanks for all your input!

[bbb]

yes, yes, no always was current, yes revalued and now that is your new cost basis, yes submitted FMV to custodian, yes once the value was changed I removed the asset from IRA at the new value, the ownership does not change to Magna (still you, but recorded there) yes I paid the tax due according to the 1099R issued by my custodian.

 Your next group, if you revalued, what you paid means nothing now, the new value when you removed from IRA is your new cost basis and you add any premiums paid since then.

When I did the line 21 other income, I said cost of insurance policy payout from (entered trust id number).

Turbo tax will show how to do substitute 1099-r, this is form 4852.

leave your email here or a phone number, i'm happy to call.  I would do it, but don't want  to answer 10,000 calls.  Good luck

[jdlacrz]

[email address removed]

[bbb]

sorry my friend, I see you tried to leave a email address it removed it.  You can try and trick it by spacing it out and leave out the at sign.  Ie john doe yahoo .  I will try to break the code, I think I can handle it.  I don't know another way.

[jdlacrz]

Iroczonnos
A
O
L

[bbb]

i got it, will email you tonight so you can send me your number - i'll be happy to help you

[jdlacrz]

Awesome thanks

[bbb]

I tried several times, it keeps getting returned.  I set up a email account you can send to me.

George  then a dot then barry the at sign usa  then a period and then com.  I will do my best to help.  Sorry these is such a pain

[jdlacrz]

Never received anything

[bbb]

keeps bouncing.  I did give you an address, looks like they removed it.  At the end of the day, there is enough here you should be ok to figure this out.  I wish there was an easier way for you to track me down, but it appears as if there is not.

George dot barry at usa dot com

[jdlacrz]

Have you checked e mail lately?