How do I report sale of qualified small business stock?

[TomYoung · Accepted solution]

You should be able to do that using the "Stocks, Mutual Funds, Bonds, Other" interview. 

If you didn't get a 1099-B then you should be dropped right into an interview where you select "Stock" as what was sold.  As you proceed with the interview at some point you'll come to a page that asks about "Special situations" and that's where you'll indicate SBS.

If you did get a 1099-B then get into that same interview flow by clicking on "Guide me step by step".

Tom Young

[Anonymous]

I did not come to a page that asks about "Special Situations" and could find no way to indicate SBS. The pages I came after selecting the "Stocks" radio button were: Some Basic Info About This Sale, Did you Buy This Stock (selected: I bought this stock; two or more times), Enter Your Purchase Information, Let's Verify How Long You Had The Investment (three times, as I bought it in three purchases), You Have a Long-Term Gain from This Sale, and then back to Here's the info we have for these investment sales. That's it. The calculations assume LTCG for all of my shares even though half of them qualify for QSBS, if I had a way to indicate that.

What did I miss?

[TomYoung]

Did you, or did you not, get a 1099-B?

[markaboswell]

After entering details about the stock sale, eventually I reached a page titled "Do Any Special Situations Apply to This Sale?"There is a choice for Small Business, which I chose. After continuing through the interview, I found that Turbotax entered the sale correctly. I am using the Premier version.

[Anonymous]

I did not get a 1099-B. The transaction was managed through a family member. I will follow up with them. In the meantime: is there no way to indicate QSBS in the TurboTax flow if I indicate that I did not receive a 1099-B? Could I just go to the form and modify that directly to indicate QSBS?

[TomYoung]

You can indicate QSBS either "with" or "without" getting a 1099-B.  It's simply more direct if you start off with "no 1099-B".  If you do that you will reach a "special situations" page.

[Anonymous]

I did start off with "no 1099-B". I did not reach a "special situations" page. The page flow when I now edit this sale is exactly what I outlined in my first comment above. When is that page supposed to appear in the page flow? Any thoughts as to why it does not show up for me? I've clicked "edit" and stepped through it about half a dozen times now, so I'm confident in the page flow I shared.

[TomYoung]

I just entered a test case, no 1099-B.  The page titles are in quotation marks and my entry on the page follows the ">"

"Choose the type of investment you sold" > Stocks
"Some Basic Info About This Sale"
"Did You Buy This Stock" > bought
"Tell Us When You Got This Investment" > date
"Tell Us a Bit More About This Sale" > I'll enter total > $
"Do Any Special Situations Apply to This Sale" > SBS
"What Kind of Small Business Stock" > QSBS not reinvested
"Tell Us About the Stock Sold" > tick the boxes
"Qualified for Tax-Free Sale"

I was able to then go back and edit the sale, seeing the same flow.

Try deleting the trade entirely and trying again.

[Anonymous]

This stock was sold in a single event last year, but the shares were purchased on three different dates. If I "choose the number of times you purchased or received this stock for this particular sale" to be "Two or more times (multiple lots)", I do not get the special situations page for each purchase (entered as details for each purchase as opposed to summary information). All I get for each purchase is "Let's Verify How Long You've Had This Investment", with two holding period choices (short-term and long-term). It's interesting it asks me to confirm this since it should be a given from the dates, but that's neither here nor there. The key point is that there is no special situations page in the "Two or more times [purchases]" flow.

If, instead, I put in the three different purchases as three different distinct sales (all with the same sale date) and for "choose the number of times you purchased or received this stock for this particular sale" to be "One single time (single lot)", I do, indeed, get the special situations page.

I can make do, but it's clunky and confusing (to wit, having spent a day trying to figure out what's going on, with the much appreciated support of this forum). Also, it doesn't match reality, since all three of these lots were sold in a single event.

This seems to be a bug, and I hope this gets fixed for the sake of future folks who run into this.

[TomYoung]

When you mentioned buying the stock at 3 different times I almost said something.  The fact that you're getting a "short-term" holding period mentioned means you don't qualify for QSBS under Section 1202 that requires a more than five year year holding period prior to sale.

[Anonymous]

The three purchase dates are February 2011, August 2011, and May 2012. The first two qualify, the third does not. When I enter them as separate sales (each with a single purchase), I get the expected flow (including special situations). When I enter them as one sale and three purchases, I do not get the special situations page, though I do get one titled "Let's Verify How Long You Had The Investment" (once for each purchase). It says "The dates you have entered indicate you have held this investment for more than one year. If necessary, you can change the holding period below. (This is not common)."

To reiterate, I'm not hung up on the "...Verify..." page. It's the absence of being able to specify special situations that is causing problems.

Try the flow yourself with some made up shares that you bought more than five years ago, sold in one traunch but bought on different dates. It should reproduce the issue I'm seeing (i.e., the lack of an ability to specify special situations/QSBS).

[TomYoung]

That May 2012 can't meet the 5-year holding period as that's in 2017 so perhaps that's the issue?  I'll take you at your word about the behavior you're seeing.  I can post something in the SU lounge about this and maybe get some kind of response.

[Anonymous]

I tried leaving off the third transaction to see if I get the "special circumstances" flow when all of the purchases conform to the QSBS requirements. No luck.

I appreciate your posting this in the SU lounge. I look forward to hearing what you find out. This really does seem to be a bug, but I'm not sure how to file one.

[TomYoung]

I've been told that the issue has been passed along to the developers for investigation.