Joint Brokerage Accounts and Capital Gain/Loss Taxes with Nominee

[mshlyaktaxquestions1]

I have a joint account with my sibling. I'm the primary account holder, so each year I file a 1096 with the correct 1099 form. We have never sold anything in the account, however we get dividends and interest, so I file the 1096 with the 1099-DIV and 1099-INT. We contribute to our account equally, so everything is 50/50 (at least that was our understanding with the contributions and tax part). So, when we do sell stocks, the capital gain/loss would also be split 50/50. 

I understand for the 1099-B, I would have to report each individual sale,  what I'm concerned about is when we sell stock with an odd number of shares. 

For example, lets say we bought and held 3 shares of stock A. We sell all 3 shares for a capital gain, how would we split it? I don't think writing 1.5 shares in the 1099-B would be correct, so any advice or tips would be greatly appreciated. 

A better way to ask, what do we do with the last odd share? 

Thanks to anyone in advance.

[Bsch4477]

Selling fractional shares is not unusual. 

[rjs · Accepted solution]

You can sell fractional shares. People do it with mutual funds all the time, with the number of shares calculated to 3 decimal places. There are also situations where fractional shares of stock are sold. You can certainly report a sale of 1.5 shares.

Note that the number of shares is not actually entered on Form 1099-B. There's no place for it on the form. The information is usually provided by the broker, and it's common to include it in the description on Form 8949, but the number of shares is not required. The figures that actually get reported are the dollar amounts of the proceeds and the basis, not the number of shares.

[mshlyaktaxquestions1]

Interesting, I guess that makes sense. What if people didn't split 50/50, so the fractional makes actually sense.

So to make sure I understand. If I were to sell the 3 shares of stock A as the primary holder, I could report 1.5 shares belong to my sibling using the 1096 with the IRS 1099-B and form 8949 with the proceeds and cost basis.

"Note that the number of shares is not actually entered on Form 1099-B. There's no place for it on the form."

From your reply, I just looked at the IRS website for the 1099-B form, and line 1a is asking for a Description of property example, 100 Sh. of XYZ Co. So, I think I will have to enter the total amount of shares there, the total amount of proceeds and cost basis. And then on form 8949, go through individual sales, and make sure the numbers line up correctly. 

So the hypothetical example would look like:
Form 1099-B 1a) 1.5 shares of stock A
                        1b) date bought    example I could write various for multiple purchases, or a single date
                         1c) date sold          example I could write various for multiple purchases, or a single date
                         1d) Proceeds total example  9$
                         1e)Cost basis  total example 5$

Then check out all the necessary boxes. Like short term or long term, etc

The on form 8949, I would actually write out the details of all the purchases with the information above using:

Description of Property (1a)

Date Acquired (1b)

Date Sold (1c)

Proceeds(1d)

Cost or other basis (1e)

Adjustments (1f)

Amount of Adjustment(1g)

Gain or (Loss) (1h)

Short or Long

Again, thank you for your time and help!

[rjs · Accepted solution]

---

@mshlyaktaxquestions1 wrote:

1c) date sold          example I could write various for multiple purchases, or a single date

No, that's not right. For the date sold you have to enter the actual date of the sale on the 1099-B, even if the stock that was sold on that date was not all purchased on the same day. If stock was sold on multiple dates, you have to report each sale separately on the 1099-B.

However, others may disagree, but I don't think it's really necessary for you to issue a 1099-B to your sibling. He or she does not need a 1099-B to report his or her share of the sale. The IRS is not going to complain if someone reports a sale for which there is no 1099-B. If you are using TurboTax, just answer No when it asks if you got a 1099-B. On Form 8949, box C and box F are for sales that were not reported on a 1099-B, so there's nothing unusual about it.

You haven't said anything about reporting your share of the sale on your own tax return, so I just want to clarify it. You have to report the full amount as shown on the 1099-B that you receive from the broker. Then you enter an adjustment for your sibling's share, with adjustment code N. On your Form 8949 columns (d) and (e) will show the total proceeds and basis. The code N will be in column (f) and the amount of the adjustment will be in column (g). If you are using TurboTax, check the box that says "Some (or all) of the proceeds from this sale do not belong to me." If you do issue a 1099-B to your sibling, it should show only his or her share of the proceeds and basis.

[mshlyaktaxquestions1]

I copied and pasted the 1b and 1c without thinking , so yes that was an error about the date sold. I would report all that. TY!

Interesting point. I'll probably end up reading more from the IRS site about this. From what I read before, the IRS requires the 1099-B with the 1096 to convey the message that not all of the sales are from me. Otherwise, why would my sibling need to submit a 8949 with a schedule D if he didn't receive a 1099-B?

When I was looking up the form 8949 stuff related to this, I got lucky and found the code and stumbled on N for the adjustments 🙂

hopefully this info will help other as well!

[rjs]

---

@mshlyaktaxquestions1 wrote:

why would my sibling need to submit a 8949 with a schedule D if he didn't receive a 1099-B?

---

He needs to file Form 8949 and Schedule D because he sold an investment. The fact of having sold something is what gives rise to the requirement to report it, whether or not you receive a 1099-B.

[Critter-3]

Ok... may I make a simple suggestion so you both can stop doing contortions when you have an account in common.

The person whose SS# is listed on the broker's consolidated statement  will prepare their return WITHOUT the info from the broker ... note the refund/balance due...  then add the broker statement  and note the difference to the bottom line refund/balance due.   One Half of the difference is what the other party owes you and settle up... done. 

Better yet ... get the account divided into 2 accounts, one for each person and this problem solves itself. 

[fanfare]

having stock in joint ownership in one account is troublesome. not advisable.