Interest shortfall on Contingent Debt

[rbnudelman]

Does anyone know how to report an interest shortfall on contingent debt in ProConnect? First, I know the gain on the sale of the debt needs to be reported as ordinary gain on the 8949 with a Code of O so that the gain is treated as interest income. I do not know how to get that to report that way.  I believe this interest can be adjusted down by the interest shortfall on contingent debt but I am not 100% sure on that. Either way, I have no idea how to report this transaction in ProConnect.  It is currently showing as a long-term capital gain which I know is not correct.

Any help would be greatly appreciated.

Thanks!

[PhoebeRoberts]

Looks like Code O is other adjustments. Enter the full amount that should be reported as interest income in the Other Adjustment to Gain or Loss field in the Schedule D input (~5 items below the wash sale adjustment line). Make a manual entry for interest income (Shortfall on Contingent Debt is the description I might pick) for the appropriate amount.

[rbnudelman]

Thank you, Phoebe.  That is pretty much what I did.  Only difference was, I just entered the Interest Shortfall as an OID interest adjustment.  Has the same effect without having to create a separate Interest item.

I've been doing this for almost 30 years and I think this may have been the first time I have seen an Interest Shortfall on Contingent Debt reported on a 1099.

Learn something new everyday.