Stock Sale With Margin Balance

[Vivek76]

I have a margin account with a stock brokerage firm. In my 1099-MISC, the stock broker company listed the entire net gain of the sale. It doesn't include the margin balance paid. I thought it would deduct the margin balance paid from the net gain. Can I adjust my return to reflect the margin balance?

For example:

1. I bought 100 shares for $10k.

2. The value of the stock went up to $50k.

3. I used a margin balance of $40k to purchase more shares.

4. I sold all the shares several years later for $100k.

The stock brokerage firm reported a net gain of $90K on my 1099-MISC. When I transfer the data to my tax return, the entire $90k shows on my return. My net profit is only $60k. Can I deduct $40k from my net gain when filing my return? If so, where do I enter the $40k borrowed money?

[ThomasM125]

It seems like the investment sale should have been reported on a form 1099-B where the sale proceeds and cost basis would be listed. If the cost basis was wrong, there is an option in the program to correct it. Furthermore, an investment sale like you mention is capital gain income, but if you report it by entering a Form 1099-MISC it is likely to show up as ordinary income. I suggest you report the sale as an investment sale by following these steps:

1. Choose the Federal option on your left menu bar
2. Choose Wages & Income
3. Choose the Investments and Savings (1099-B, 1099-INT, 1099-DIV, 1099-K, Crypto) option
4. Choose Add investments
5. Choose the Stocks, Bonds, Mutual Funds option and follow the instructions
6. Indicate that you don't have a form 1099-B and enter the sale proceeds and cost basis of your sales

As far as the form 1099-MISC is concerned, you can enter it and then enter a negative income amount to cancel out the income as follows:

1. Choose the Federal option on your left menu bar
2. Choose Wages & Income
3. Find Less Common Income in the list of income sources
4. Use the Show More option to expand the choices and choose Miscellaneous Income, 1099-A, 1099-C
5. Choose the Other Reportable Income option and find Other Taxable Income in that section
6. Enter a description for your adjustment and the amount as a negative number