Bankrupt stock no 1099-B

[matthew-monroe]

I am trying to enter a stock transaction that I don't have a 1099-B for in TurboTax online PREMIER 2022 (the company went bankrupt).  I can not find any way to indicate I don't have a 1099-B, all the choices and options I can find require 1099-B info, please help.

[PattiF · Accepted solution]

To enter the bankruptcy  without a 1099-B follow these instructions:

•  Click on Income & Investments
• Scroll to Investments and Savings and click on Start (or Edit or Review)
• Click on Add Investments. And then Continue on the next page
•  Choose to Enter a different way
• Pick Stocks, Bonds, Mutual Funds and Continue
• Which bank or brokerage sent you a 1099-B for these sales?, Enter name of brokerage, and Continue
• Answer questions on next page and Continue
• Now, Choose how to enter your sales, One by one, Continue
• Continue past the page Look for your sales on your 1099-B
• You can enter your sales on the next page.
• In the first box, Sales section, Choose Short-term (or long-term) did not receive 1099-B form

Continue with the information for your sales

You would enter all of the information as though you did have a 1099-B with worthless as the description and December 31, 2022, as the date sold.

When entering the information, be sure to select that you did not receive a 1099-B form

You can deduct worthless stock only in the tax year it becomes completely worthless. This normally happens when the corporation files for bankruptcy, stops doing business, and has no assets. Financial difficulties won't make a company's stock worthless unless there's no hope that the company will pull through.

Enter a worthless stock like any stock sale but with a sales price of zero and the word worthless in its description. Enter the correct cost or basis, date acquired, and December 31 as the date sold.

[matthew-monroe]

Thank you, exactly what I needed to know.

Matt

[Dfery]

I have straight cash in FTX.US.  I did not receive a 1099 for the interest.  I have lost the cash and the interest is accrued because of Bankruptcy?  How do I handle this one?  Is this a capital lost, or a theft?

[ErnieS0]

It depends on whether your account is frozen in bankruptcy or whether you sold and had a recognized loss.

The IRS issued a chief counsel memorandum in January stating that a taxpayer cannot claim a loss if they still own cryptocurrency that has substantially declined in value because they have not abandoned or otherwise disposed of the cryptocurrency, and the cryptocurrency is not worthless because it still has value.

You’ll have to wait until you can access your account and close it out or the case is settled in U.S. Bankruptcy Court.

See Memorandum Number: 202302011.

@Dfery

[Dfery]

This is not crypto currency it is cash.  Cash that I executed an ACH on pre bankruptcy filing and it did not process to my bank account.  There are a bunch of FTX.US customers in this boat.  I have no indication if I will get this money back.  It is not frozen, is simply does not exist despite mine and several other to garner the attention of the bankruptcy court.  I attempt to liquidate but it did not happen, so I lost my principal cash and the interest gains.

[ErnieS0]

Since you lost cash, it would not be a capital loss. It probably meets the definition of an investment Ponzi scheme loss as outlined in IRS Revenue Procedure 2009-20 because lead figure(s) of FTX were “charged by indictment or information (not withdrawn or dismissed) under state or federal law with the commission of fraud, embezzlement or a similar crime that, if proven, would meet the definition of theft ….”

You can use the safe harbor procedure outlined in that Rev. Proc.

Here’s what to do in TurboTax:

1. Type casualty loss in Search (magnifying glass) in the upper right
2. Tap Jump to casualty loss
3. On “Casualties and Thefts” select YES
4. On “Casualty or Thest Event” enter a description and date. Under Property Tax choose Income Producing Property (e.g. Business property, Investment property)
5. Complete all the screens. 

Under the safe harbor rule, you can claim (a) 95 percent, for a qualified investor that does not pursue any potential third-party recovery; or (b) 75 percent, for a qualified investor that is pursuing or intends to pursue any potential third-party recovery.