Bed Bath & Beyond Bonds - When will it settle?

I’m trying to be a bit proactive with respect to taxes this year and have an unrecognized capital loss on the bonds. Not really expecting a whole lot out of these, but if the loss is recognized this year, would like to offset the loss with a gain elsewhere, most likely on some Brk.b that I’ve held long enough to be LT gains and happens to be hitting new highs today.

So, can I expect for the bankruptcy to be complete by the end of the year, or will it likely be sometime next year? Am I better off just selling them now (if there is even a market for them) or waiting.

I’m pretty sure there is a market, as there is likely to be some recovery for bondholders. If you look at the latest filing on the website Kroll Restructuring Administration some of the dates extend into 2024, so if you want to use the losses in 2023, you are better off selling, IMO.

AJ

2 Likes

I’m fine waiting until 2024. I just don’t want to get caught realizing the loss late in 2023 and then scrambling to find an offsetting gain. And thank you for the Kroll link. That gives me much more information to base decisions on.

You will be able to carryforward the amount of loss that you don’t use in 2023, with the exception of $3,000 that will be applied to your ordinary income. If you don’t have very much ordinary income, and can’t find an additional amount through, for instance, doing a Roth conversion or otherwise withdrawing from retirement plan, this article from Fairmark Capital Loss with Little or No Income - Fairmark indicates that that the entire capital loss would be carried forward. So, I don’t think that you would really need to scramble to find an offsetting capital gain.

I will also point out that in most cases, using $3000 of a capital loss to offset ordinary income is better financially than using it to offset long-term capital gains. Similarly, using
the loss to offset short-term gains would be better financially than offsetting long-term gains.

AJ

3 Likes

I’m also trying to get our MAGI to come out in a narrow range for ACA subsidies for the next few years until we are on Medicare.

Long-term capital gains rate is zero for us, anyway, so I suppose it would be better to offset some short-term gains or ordinary income to the extent possible, though I hadn’t really thought that through.

Don’t really want to have carryforward losses to a significant degree, just to make the record-keeping easier. My understanding is that we would only be able to use $3000 of the carryforward loss each year, and in the worst case scenerio, we would be looking at several years to use that up.

I’ll keep my eye on the filings on the Kroll website. If I can postpone any action to next year, I’ll probably do that and not do any sales that realize large capital gains this year.

Thanks again.

At least through 2025, the range isn’t that narrow. The Inflation Reduction Act extended the American Rescue Plan subsidy extension beyond the 400% of FPL until 2025. So for 2023 - 2025, for MAGI between 150% and 400% of FPL, the old subsidy calculations will still apply. If your MAGI is over 400% of FPL, your premiums will be limited to 8.5% of your MAGI.

AJ