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In 2000 I got a settlement distribution on a bond (part of a larger bond fund)that went into default in 1992. They consider it a return of principal. It was part of a tax-free portfolio. How do I account for this?

I received a 1099-B. I'm using Turbo Tax and don't know what to put for the description. Is it the name of the payer (Chase Manhattan Bank) or the specific bond (Washington Public Power Supply (WPPSS)) or National Trust 177 and the number of shares?

I'm really confused! Thanks for your help.
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I would list the payer as xxx CMB National Trust 177 (where xxx is the number of units of the bond fund you own). If CMB didn't give you cost basis information, I would use the total amount of the proceeds as the basis *IF* you still own the fund *AND* your basis in the fund on the date of distribution was greater than or equal to the amount of the distribution. This results in the distribution being a return of principal with $0 capital gain.

If you no longer own the fund, then enter $0 as the cost basis and the total receipt is a long-term capital gain.

If your remaining basis in the fund is less than this distribution, enter your remaining basis as the basis of this distribution and the result is a long-term capital gain.

Ira
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