Author Topic: tax question: "worthless security"?  (Read 1465 times)

mrwhizzard

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tax question: "worthless security"?
« on: February 09, 2018, 10:58:34 AM »
I'm using TaxAct this year, and after importing all of my LC and Prosper 1099-B transactions, TaxAct is flagging a warning regarding each of the transactions with a $0 "proceeds" (which is the case for all the charge-off's that have had no recoveries so far):

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You have not entered a sales proceeds amount for LendingClub Note 123396681. Please verify that this is correct. If there are no sales proceeds then one of the first two check boxes below should be checked. If your sales proceeds when entered round to $0, you can ignore this alert.

The two check boxes referred to are:

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  • Check here if this property is an option you purchased that has expired.
  • Check here if this property is a security that became worthless during the tax year. The IRS considers worthless securities as if they were sold on the last day of the tax year, therefore if this is a worthless security you will need to enter 12/31/2017 above for the date sold.

Now, arguably the second check box could apply here. But it seems like a bad idea to change the reported sale date, since not only will it no longer match the 1099-B, but it will in some cases change the transaction term from short to long. My instinct is to ignore this warning, and use the data from the 1099-B as reported, but I wanted to check if anyone else has a differing opinion here.

storm

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Re: tax question: "worthless security"?
« Reply #1 on: February 09, 2018, 05:39:50 PM »
I don't think the IRS really cares about the dates as long as the amounts match what LC sent them.  You may be able to go to the form view and manually change the dates if you desire.

That said, I just enter the total sale price and cost basis and say the dates are various instead of listing each and every note.  Otherwise, my tax filing would be as big as a book.

Debt Free

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Re: tax question: "worthless security"?
« Reply #2 on: February 09, 2018, 05:51:41 PM »
 the IRS tax code book, correct?   :o

mrwhizzard

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Re: tax question: "worthless security"?
« Reply #3 on: February 09, 2018, 06:03:10 PM »
You may be able to go to the form view and manually change the dates if you desire.
Well, at least that's not a problem. TaxAct isn't making me change anything, it's just telling me that I should do it differently.

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That said, I just enter the total sale price and cost basis and say the dates are various instead of listing each and every note.  Otherwise, my tax filing would be as big as a book.
I wrote a script to extract all the info out of the pdf, and convert it into a csv file I could upload directly. Since it wasn't any extra work for me, I guess I don't really care how big of a book I'm making. :)

storm

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Re: tax question: "worthless security"?
« Reply #4 on: February 09, 2018, 07:11:36 PM »
I wrote a script to extract all the info out of the pdf, and convert it into a csv file I could upload directly. Since it wasn't any extra work for me, I guess I don't really care how big of a book I'm making. :)

I did that for a few years as well.  It was a pain to delete all the transactions if I didn't get the .txf file formatted properly.  After hearing from others on this forum that they just entered the totals with no ill effects, I started doing it too.

I just finished mine, and I noticed my tax software didn't generate a Form 8949 that lists the individual transactions.  As of 2017, it is no longer required as long as the 1099-B shows your costs basis, and there are no manual adjustments.  All the info is entered on line 1a (short-term) and 8a (long-term) on the Schedule D.

Lovinglifestyle

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Re: tax question: "worthless security"?
« Reply #5 on: February 09, 2018, 10:00:54 PM »
I did it with TaxAct the way Storm says.  The cost basis of charged offs (Dec. 31, '17) and sales were added together, and all were counted as short term, on line 1a, Sched. D.   Line 8a (long term) stayed blank except for the prior carryover on Line 14 and 15.  The warning said that was happening, but I couldn't find anything to do about it so I gave up and filed anyway.