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robertorv2016
New Member

I sold stock from my Capital Construction Fund. The capital gain from the transaction is exempt from tax if I leave it in the fund. How can I avoid pay taxes?

Normally Dividends, Interest, etc. in a Capital Construction Fund are exempt from taxes. There is a place in TT step by step where I can adjust the amount of gain.

I can't find  similar steps to adjust the gain when I enter Proceeds from Broker.

1 Best answer

Accepted Solutions
TomYoung
Level 13

I sold stock from my Capital Construction Fund. The capital gain from the transaction is exempt from tax if I leave it in the fund. How can I avoid pay taxes?

"Normally Dividends, Interest, etc. in a Capital Construction Fund are exempt from taxes. There is a place in TT step by step where I can adjust the amount of gain."

You don't mean "gain" (I assume) in this sentence, you mean "income". 

I think you're going to have to mail in you income tax return as the IRS is requiring that you attach "statements" to your income tax return when you exclude income associated with the Capital Construction Fund and it's entirely unclear if you can attach a "statement" to an e-filed income tax return. 

As far as interest income goes I'd think that on the page "Report Interest Adjustment" you'd enter the adjustment in the amount of CCF interest and tick "Other reasons".

Similarly, as to dividends, I'd think on the page "Tell us about your dividend adjustment" you'd enter the adjustment and tick "Other adjustments, including restricted stock dividends reported on Form W-2." 

On Schedule B you'll see a line item "Other Adjustments" in "Part I - Interest Income" and and "Other Adjustments in "Part II - Ordinary Dividends".  I think you should hand-write "See Schedule 1" next to those Other Adjustment(s) notations.

As far as capital gains goes, there is no "automatic method" of eliminating those gains.  IF the broker is reporting basis to the IRS THEN you can click the blue "I'll enter additional info on my own" button.  On the next page enter the correct basis in the "Corrected cost basis" box, which, I take it, is the same as the proceeds.  On Form 8949 where you've made that adjustment I'd then put an asterisk next to that adjustment and explain the asterisk as "See Schedule 1." 

IF the broker is not reporting basis to the IRS THEN simply enter a basis that's the same as the proceeds.  I'd put an asterisk on that particular trade on Form 8949 with the same  "See Schedule 1" notation.

Here's the IRS's instructions with respect to Capital Construction Fund amounts:

----------------------------------------------------------------------------------------------
Tax Treatment of CCF Earnings

Do not report on your income tax return any capital gains from the sale of capital assets held in your CCF account. This includes capital gains distributions reported on Form 1099-DIV, Dividends and Distributions, or a substitute statement.

However, you should attach a statement to your tax return listing the payers and the amounts. Identify the capital gains as “CCF account earnings.”

Do not report any ordinary income (such as interest and dividends) you earn on the assets in your CCF account. Nevertheless, you should attach a statement to your return to list the payers, the amounts and to identify them as “CCF account earnings.” If you are required to file Form 1040, Schedule B, Interest and Ordinary Dividends, you can add these earnings to the list of payers and amounts on line 1, and identify them as “CCF earnings.” Then subtract the same amounts from the list and identify them as “CCF deposits.”

Do not report tax-exempt interest from state or local bonds you held in your CCF account on your federal tax return. You are not required to report this interest on Form 1040, line 8b.

----------------------------------------------------------------------------------------------

Tom Young

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1 Reply
TomYoung
Level 13

I sold stock from my Capital Construction Fund. The capital gain from the transaction is exempt from tax if I leave it in the fund. How can I avoid pay taxes?

"Normally Dividends, Interest, etc. in a Capital Construction Fund are exempt from taxes. There is a place in TT step by step where I can adjust the amount of gain."

You don't mean "gain" (I assume) in this sentence, you mean "income". 

I think you're going to have to mail in you income tax return as the IRS is requiring that you attach "statements" to your income tax return when you exclude income associated with the Capital Construction Fund and it's entirely unclear if you can attach a "statement" to an e-filed income tax return. 

As far as interest income goes I'd think that on the page "Report Interest Adjustment" you'd enter the adjustment in the amount of CCF interest and tick "Other reasons".

Similarly, as to dividends, I'd think on the page "Tell us about your dividend adjustment" you'd enter the adjustment and tick "Other adjustments, including restricted stock dividends reported on Form W-2." 

On Schedule B you'll see a line item "Other Adjustments" in "Part I - Interest Income" and and "Other Adjustments in "Part II - Ordinary Dividends".  I think you should hand-write "See Schedule 1" next to those Other Adjustment(s) notations.

As far as capital gains goes, there is no "automatic method" of eliminating those gains.  IF the broker is reporting basis to the IRS THEN you can click the blue "I'll enter additional info on my own" button.  On the next page enter the correct basis in the "Corrected cost basis" box, which, I take it, is the same as the proceeds.  On Form 8949 where you've made that adjustment I'd then put an asterisk next to that adjustment and explain the asterisk as "See Schedule 1." 

IF the broker is not reporting basis to the IRS THEN simply enter a basis that's the same as the proceeds.  I'd put an asterisk on that particular trade on Form 8949 with the same  "See Schedule 1" notation.

Here's the IRS's instructions with respect to Capital Construction Fund amounts:

----------------------------------------------------------------------------------------------
Tax Treatment of CCF Earnings

Do not report on your income tax return any capital gains from the sale of capital assets held in your CCF account. This includes capital gains distributions reported on Form 1099-DIV, Dividends and Distributions, or a substitute statement.

However, you should attach a statement to your tax return listing the payers and the amounts. Identify the capital gains as “CCF account earnings.”

Do not report any ordinary income (such as interest and dividends) you earn on the assets in your CCF account. Nevertheless, you should attach a statement to your return to list the payers, the amounts and to identify them as “CCF account earnings.” If you are required to file Form 1040, Schedule B, Interest and Ordinary Dividends, you can add these earnings to the list of payers and amounts on line 1, and identify them as “CCF earnings.” Then subtract the same amounts from the list and identify them as “CCF deposits.”

Do not report tax-exempt interest from state or local bonds you held in your CCF account on your federal tax return. You are not required to report this interest on Form 1040, line 8b.

----------------------------------------------------------------------------------------------

Tom Young

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