I have a broker's statement for an inherited investment account that I inherited. I cashed out the account instead of receiving the stocks/mutual funds. How do I report the income?

To enter inherited stock sale, please do the following in TurboTax go to:

• Federal Taxes
• Wages & Income
• Investment Income, click Show more
• Stocks, Mutual Funds, Bonds, Other
• Did you sell any investments in 2016?, click Yes
• Did you get a 1099-B or a brokerage statement for these sales?, click No
• Choose the type of investment you sold, select Stocks (except stocks acquired via employee stock plan)
• Some Basic Info About This Sale, please type in the description of the inherited stock, number of shares, date sold, and Net Proceeds (Sale price), click Continue
  
  
• Select, I inherited this stock, click Continue
• Date You Inherited the Investment
• Cost basis, is usually market value on the date of death.
• Follow the remaining prompts

With regard to the above topic, as the 'Personal Representative' of my late father (died 6/16/2019) I cashed out several small investments (total around $2000) and dispersed the proceeds between his six children.  I did receive a 1099-B for each (three investments in total).  Can I follow the same process as described above or do I need to enter the 1099s?

 

Thanks for your help.

JanJ

With regard to the above topic, as the 'Personal Representative' of my late father (died 6/16/2019) I cashed out several small investments (total around $2000) and dispersed the proceeds between his six children.  I did receive a 1099-B for each (three investments in total).  Can I follow the same process as described above or do I need to enter the 1099s?

 

Thanks for your help.

JanJ

You should enter the 1099s on your return, because the IRS has a matching program for 1099s, and if you do not report them you may receive correspondence from the IRS.

 

However, there should not be much gain, if any, because the basis in inherited stock is equal to the fair market value on the date of death.

 

If you don't want to report the gain on your own return, you can report the capital gains (Form 1099-B, Form 1099-DIV?) (entire amount) on your Form 1040 Then, enter a Nominee Distribution for the amount that the nominee received.

 

Enter the Nominee's portion as a negative number in Line 21 with the caption, “Distribution to Nominee YYY, CAP Gains, SSN xx-xxxxxxx.”  The negative number on Line 21 will adjust the income of the reported payee to the correct amount.  

 

Enter the negative income adjustment with the following menu path:

• Federal Taxes
• Wages & Income
• Less Common Income
• Miscellaneous Income
• Start
• Other Reportable Income
• Start
• Other Taxable Income
• Description = “Distribution to Nominee YYY, SSN xxx-xx-xxxx”
• Amount = -$xxx

Or enter "other reportable income" in the Search Box and Select "Jump to other reportable income". Continue to the screen "Other Taxable Income". Enter the description as “Cap Gains to Nominee YYY, SSN xxx-xx-xxxx” and the amount as a negative number. These are NOT wages.

 

Be sure to advise those who received the distribution to report it.

 

TurboTax will transfer this to his Form 1040, Line 21, Page 1.

 

You can e-file with this approach because the disclosure is on the face of the return at Line 21.  

 

This question was previously answered by stanmad1

 

@JanJ

If you nominee out all or part of a 1099, you must supply the same type of 1099 i.e 1099-B -> 1099-B.