Phil wrote:
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Phil,
This is actually a tricky tax question. I haven't looked at that
specific transaction but it sounds like MCI/your broker believe that it
doesn't qualify as a nontaxable, like-kind exchange. That's the basic
rule underlying the tax treatment of, for example, stock you receive in
mergers. In that exchange you carry your cost basis over from one to the
other, and the only thing that lands on 1099-B is the CIL - sale of any
fractional shares ("cash in lieu"). So the only thing on Schedule D is
the CIL and its associated basis.

Not all recapitaliations qualify for that treatment though. The exchange
of Bond A for Bonds B,C,D sounds more like a taxable exchange where
there would be gain (in this case, loss) realization and a new basis
based on that. It sounds like there's the additional layer of having CIL
so you have a kind of odd basis-allocation problem.

I would contact investor relations and ask them very specifically how
this exchange is to be treated on your tax return, and how to allocate
basis in your new bonds. I'm surprised they didn't mail anything out
when it happened, this isn't an easy thing to figure out. I'm not sure
you can figure it out, without information from MCI.

-Tad

Rich,

I couldn't agree more: #2. shouldn't be on my 1099-B whatsoever! And
also that the 3 new sets of bonds shouldn't be there / I'd written that
in my 1st post, attempting to illustrate a point I now realize wasn't
germaine / wasn't on-point. Now MCI Inc.'s Investor Relations, whom I
spoke with via phone today, could only tell me that they were required
to assign "some sort of value" to the orig. bonds, to all bond
investors 1099's this year ...but couldn't explain to me why.

Anyhow, I think I've decided to just claim my basis of that original
03/07/01 investment, as being exact-same-$-amount, as that which the
1099-B lists as the $-amount of proceeds received, on my Sched. D ...
making it a "wash" / neither a gain nor a loss, .... and thus be able
to claim my revised basis (bases?) in the 3 sets of new notes, for when
I sell those, at some future-date.

P.S. - And I won't forget about accounting for those fractionals on my
Sched. D too; after all, those are also line-items on my 2004 1099-B !


Thanks for responding Rich!

Sincerely,
Phil

"Phil" <psagle[at]gmail.com> writes:

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That's an important word.

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Which was probably for a fractional note.

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That's all it should mention, since that's all that was SOLD.

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There shouldn't.

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You shouldn't attempt that.

then I'd be left without any Basis for whenever in the future I may
- quote -

The basis of your old notes carries into the notes you got
in exchange.

- quote -

No such loss was realized in 2004 (except on the sale of the fractional
note).

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

I've spent several weeks trying with my brokerage, but they refuse to
provide either advice / a revised 2004 1099-B, to this question:

Background: previously I'd held 03/07/01 MCI Inc. Senior Notes, until
these were both
A. exchanged 04/28/04 for three sets of new MCI Inc. Notes, and
B. also spun-off some 05/04/04 Cash "in Lieu Of",

But of which, Summed/Totaled-together, is less than the original $-Cost
of my original 03/07/01 investment ...by approximately $1,000.00.

Now for my problem: my 2004 1099-B ONLY mentions:
1. the Cash "in Lieu Of", and that;
2. I'd exchanged ALL OF my original 03/07/01 investment, for a
certain-$ amount (which just is NOT correct!.) There's no mention
whatsoever of the 3 sets of new MCI Inc. Notes on my 2004 1099-B!

... so, if I were to-attempt today to include #2. in my 2004 Schedule
D, then I'd be left without any Basis for whenever in the future I may
decide to sell the 3 sets of new MCI Inc. Notes.

Does anyone have any advice, as to how I can accurately account for the
fact-that there was a $1,000.00 loss realized here during 2004 ... just
not on my 2004 1099-B?

Sincerely,
Phil