Lehman Bros Bonds Loss

[doowntax]

I own Lehman Bros bonds. Following Lehman's bankruptcy, the holders of the bonds are being paid partial settlement amounts twice a year for an unknown number of years. Meanwhile, the tax code says that we cannot claim a capital loss on the bonds until the final
settlement amount has been received. Lehman bros issued some "Escrow" bonds that supposedly a defaulted bond owner can sell to give up his right to the remaining settlement amounts to be paid in the future, and take the loss now. My problem is that my broker says that there are no takers for these Escrow bonds, so they are worthless, and yet I cannot declare them worthless, and have to wait, and I'm unable to take the loss. The broker said a tax accountant may have a way out. Any suggestions?

 

[The Finance Writer]

I'll buy them for $1 but you need to pay the fees with the transfer agent.

 

[doowntax]

Thank you very much for trying to help me. I have $8000 of these bonds with Fidelity Investments. I would accept to sell the Escrow bonds which are worth less than 1% of the original value for $1, so that I can take the loss this year, but I just finished talking to Fidelity to ask them about the commission , and they said they are not allowed to do this trade between individuals. They deal only with wholesale broker dealers. They also claim that Escrow bonds are not able to be traded. I argued with them that on the contrary, these bonds were issued to replace the original bonds in order to allow the owners to trade them. So, according to them, there is nothing I can do until the bonds are officially declared worthless. I don't agree with them, but I don't know what to do about it. Thanks for your interest.

 

[The Finance Writer]

The point of my attempt at humor is that some broker somewhere is making a market in these bonds. Fidelity is not willing to find that broker, so you'll need to make this effort yourself.

 

[Samir]

What a mess! If the escrow bonds are being sold, they have to have a value. I'd find out if there's a 'buyback' option for those escrow bonds. Then you have a sale and a sale price and can take your loss.

Otherwise, you will have to take the loss in the future and it may not be of any help then.