1099-B "Unknown Term Gains/Losses" Question

[fizzylogic]

I've been using TurboTax (and its predecessor, MacInTax) since 1990, with very few problems until this year. My sister's husband passed away recently, and I'm now doing her taxes for her. They also used TurboTax and I have all of their returns going back over a decade.

Her 2024 return is fairly simple, except for a brokerage account with Wells Fargo Advisors. The account contains a bunch of Unit Investment Trusts and her annual Consolidated 1099 statements run well over 20 pages. I was able to import this year's statement into TT Deluxe Desktop with no problems. The 1099-DIV and 1099-INT portions are straightforward but the 1099-B has a few baffling entries each year.

To cite a typical example, she currently has 3,599 shares of an AAM UIT, purchased on 4/3/24 at $11.2549/share. This is a closed-end portfolio with a termination date of 10/7/25. Her January 2025 brokerage statements shows that all 3,599 shares are still in the account, but also shows an adjusted purchase price of $10.7620/share. The 1099-B portion of her 2024 tax statement for long-term, Box E, shows 3,599 shares of that AAM UIT sold on 11/21/24. Proceeds are shown as $1,773.95 with an unknown basis or purchase date, although her November 2024 brokerage statement shows no actual sale or repurchase of shares. The $1,773.95 figure equals the difference between the original and adjusted purchase prices times the number of shares, but I don't see how this can have a tax consequence until the shares are actually sold.

TT wants me to enter an acquisition date and a cost or other basis, both of which are marked "N/A" on the 1099-B. Looking back at previous years' returns, it appears my brother-in-law always entered the original purchase date and a basis equal to the "phantom" proceeds, for a net gain of zero. This makes sense to me, since there will be no realized gain or loss until this holding is sold later in 2025.

I'm hoping someone here can confirm if this is the correct approach for Wells Fargo accounts and/or UITs in general. I'm strictly a common stock, buy & hold investor, so I'm quite unaccustomed to seeing the purchase price change after a buy transaction for any reason other than a stock split. Any advice would be greatly appreciated.

[fizzylogic]

Oops, I meant to post this question under "Get Your Taxes Done." Not sure how it landed in "After you File," but I don't see any way to move this to the correct forum myself.  Hope I can still get an answer, or that a mod can move my original message for me.  Thanks.

[DianeW777]

Yes, you are looking at the right approach. 

See the note below number 2 below for additional clarification on cost basis.

 The answers are shown below for your questions:

1. 3,599 shares of an AAM UIT - appears sold an repurchased: If she still owns the shares then it's likely you should report the cost and sales price as the same amount.  I will show wash sales below just in case there might be some  of those situations.
2. Yes, it makes sense since the shares are still held in the account. The 'sale' process may have occurred to remove the deceased and retain only the sister's name, social security number, etc. 
   1. If they jointly held the account, then your sister's cost basis would be half of the actual cost and half of the value on the date of death of her spouse. She would be allowed a stepped up basis for half of the investments in the account.
3. UITs definition for your information: A unit investment trust (UIT) is a financial company that invests in a group of securities and sells them to investors as units. UITs are similar to mutual funds, but UITs have a fixed portfolio of securities that doesn't change often. 

Wash sales cannot be combined into section totals.  They should be entered individually so that you can track your cost basis and know when you are allowed to use the information on a final sale.

Wash Sale Rule Defined:

• A wash sale occurs when an investor sells or trades a security at a loss, and within 30 days before or after, buys another one that is substantially similar.
• It also happens if the individual sells the security at a loss, and their spouse or a company they control buys a substantially similar security within 30 days.
• The wash-sale rule prevents taxpayers from deducting a capital loss on the sale against the capital gain of other stock.

Affect on Cost Basis:

• The loss that occurs on a wash sale is added to the cost basis of the shares purchased that created the wash sale.
• When all shares are sold and there is no repurchase, that increased cost basis will be used in full and used to determine gain or loss.

As long as you are tracking the wash sales and are not using them on the tax return when you are not allowed, then you can simply enter the same cost basis as the selling price. This will  reconcile your tax return with your Form 1099-B Proceeds which is what the IRS is comparing.

@fizzylogic 

[Edited: 02/25/2025 | 9:58 AM PST]

[fizzylogic]

Thanks for this response.  Looking back at previous statements, it is clear that Wells Fargo isn't selling and repurchasing the same shares, so there isn't a wash sale involved, nor does this have to do with the primary account holder's recent death.  The annual tax statements show these same kinds of "phantom sales" going back for at least the past 10 years.  This activity appears to be happening entirely within the various UITs involved—Guggenheim, Invesco, First Trust, etc., but those companies seem to report only the proceeds side of each transaction back to WF, hence the "unknown basis" and "unknown term" entries on the 1099-Bs.

I've only experienced this once in my own portfolio, with stock spinoffs from one of my dividend reinvestment plans.  That particular DRiP went through five different transfer agents prior to the spinoffs, so my 1099-B captured all the covered short and long-term transactions under the current transfer agent, but the history from prior companies apparently never carried forward.  To determine that basis, I had to dig through my statements dating back to 1997 and calculate the buy and sale figures for every reinvested dividend prior to 2011, using the spinoff percentage ratios from the companies' Attachment to Form 8937.

At least WF isn't putting me through that kind of pain, but since they are managing every investment from start to finish in my sister's account, it seems the burden should be on them to do the research and provide their clients with all the numbers needed to complete their tax returns.  I agree that the only reasonable way to record this in TT is to treat it as a wash sale with a purchase cost identical to the proceeds amount.  When WF sells the UIT shares upon maturity later this year, they will use the adjusted basis to calculate capital gain, so this intermediate "non-sale" will have zero effect on the outcome.

I guess I was just hoping that someone would see this question and say, "oh yeah, I see this with UITs all the time and this is exactly the right way to handle it."