OID interest reversal

[longschlong]

I need to claim a tax deduction for the OID accrued & claimed in prior years, but was never paid by TIAA, neither annually nor upon maturity.  How they can get away with this... it's unbelievable!  TIAA sent 1099s each year with an amount certain of OID interest that seemed to benefit me, but in reality, they kept it all.  It benefit them, or they filled out the 1099s incorrectly.  Meanwhile I paid tax on it.

I should be able to claim a loss for the OID I never received, but paid tax on.

Turbotax doesn't seem to cover this issue, but maybe I'm missing it.

[Mike9241]

many bonds were sold at less than par value (face value at maturity) the difference between what you paid to buy it and what you would get paid at maturity is OID.  OID is amortized over the life of the bond and added to the principal (what you paid)  

so your basis would be what you originally paid + the OID. if you sold it or it was called before final maturity and you got less than this total you report a capital loss if you get paid more you have a reportable capital gain.  if it reached maturity, then there should be no gain or loss but you still should report it because TIAA is probably reporting it to the IRS 

it is also possible the issuer went bankrupt which would make the obligation worthless. you would report a capital loss = what you paid + the OID. 

if none of this applies contact TIAA, to get the whole story.  

if you were not the original owner of the security,  then the Original Issue Discount reported on those 1099's likely needed to be adjusted each year 

[longschlong]

I did talk to TIAA, and they also sent a letter.  They aren't sending a 1099 in the year it reached maturity (2021), and there is no gain, or loss.  But TIAA provided 1099s that indicated OID gains every year prior (2016-2020), and these gains were not sent to me ever.  I need to take a loss on my tax form to offset the reported gains I was taxed on in prior years because TIAA never paid any gain.

BTW, this is a CD, not a bond. 

So are you saying that these should reported as a capital loss on Sched D?  I tried putting a negative value in Sched B, and TurboTax would not allow it.

[Mike9241]

cd's can also have OID if the term is over 1 year and interest is payable at maturity. at maturity you should have received was what you paid + the accumulated oid. for example you may have paid $75 for the cd and received $100 at maturity with the 1099-OID amounts totaling $25 over the life of the cd

if not something is missing 

go back to TIAA and ask them to explain. say i paid $X for the CD i had total OID on the CD of $Y the total is $Z but i only received $Q at maturity.  WHY? 

about the only situation where you would get less is if you redeemed before maturity. then you would have forfeited some of the interest. but TIAA should report that to you as forfeited interest 

[longschlong]

Thanks so much for confirming my understanding.  I agree something has been wrong.

I paid $12.0 for the cd and received $12.0 at maturity with the 1099-OID amounts totaling $0.9 over the life of the cd, and no interest payments during the term.

TIAA is closed now, but I'll call Monday.  When I spoke to them before, I recall they stonewalled me.  No manager was available.  It's called a WorldCurrency Marketsafe CD.  So my loss on the CD would be the tax on the OID, maybe $0.3.  Which is a sunk cost.

[Mike9241]

see this thread. i do not know if it's true but if it is it seems investors were not putting their money into a typical CD.   the jist of this article is you were guaranteed to get principal back but the interest return if any would be dependent on the appreciation of the underlying assets such as gold, foreign currencies, etc.

https://www.bestcashcow.com/avoid-the-tiaa-4-year-diversified-assets-marketsafe-cd.html 

[longschlong]

Definitely not a typical CD.  The one in the article is similar to what I had, but mine invested in 4 foreign currencies.  This is my second CD like this.  The first one invested in 4 metals instead of currencies, and it did pay out, but much less than if I purchased the 4 different ETFs for the metals.  They do return the principle, so that is the only feature that is like a typical CD.  And since they return principle, I could justify the muted returns on the metals CDs.  The metals CD also paid out interest in the amount of the total of all its1099-OIDs.  With the currency CD, I don't understand how they knew how to populated the info on the 1099-OIDs if the investments had no return.

I will call them again, and then go to the CFPB if I get stonewalled again.

[Mike9241]

this is a guess. but during some of the 4 years the value of the foreign currencies could go up.  if the total FMV of the assets was greater than the principal at year end that would be your OID for the year.   at the end the value could have dropped so no interest payment was due you. 

[longschlong]

So I did talk with TIAA.  They claimed that the IRS made them do it.  And what they claim the IRS made them do is... book the annual OID based on their US CD rate, not based on the underlying instrument (i.e. foreign currency).  They disclosed the currencies and the changes in the applicable exchange rates for the 5 year term.  They lost about 5% collectively.  I walk away with a zero return.  And that's the attractiveness of what they sell.  Have the upside risk of the foreign currencies, with none of the downside risk.  I imagine that they invested the funds in the foreign markets for free for 5 years, and paid me back in USD, but kept their investments to liquidate at a future point in time.

They couldn't explicitly advise what to do with my OID accrual on record with the IRS, but they 'blinked three times' (LOL) when I said that I would take a capital loss on Sched D.  Little scared to do this without the proper 1099 documents being supplied to the IRS, but I guess that's what is happening with crypto these days.