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The Form 1099-R appear to be reporting an in-kind distribution of the ESOP shares. With an in-kind distribution, the cost basis of the shares becomes the gross distribution amount shown in box 1 of the Form 1099-R. The holding period for the shares begins on the date of distribution, so the sale reported on the Form 1099-B is a sale of a short-term capital investment. Presumably the Form 1099-B is reporting an non-covered sale requiring you to provide the cost basis, the distribution amount on the Form 1099-R, so your short-term gain/loss is $0.
The Form 1099-R appear to be reporting an in-kind distribution of the ESOP shares. With an in-kind distribution, the cost basis of the shares becomes the gross distribution amount shown in box 1 of the Form 1099-R. The holding period for the shares begins on the date of distribution, so the sale reported on the Form 1099-B is a sale of a short-term capital investment. Presumably the Form 1099-B is reporting an non-covered sale requiring you to provide the cost basis, the distribution amount on the Form 1099-R, so your short-term gain/loss is $0.
I'm not sure that you ARE doing anything wrong. Assuming that the "in kind" distribution of the stock out of the ESOP and the sale of that stock happened on the same day, you're going to be taxed, overall, on the Box 1 amount; part will be taxed (as ordinary income) when you enter the 1099-R, and part will be taxed (as long term capital gain) when you enter the 1099-B. So in a way you will be "taxed twice" but it will be calculated on ordinary income and long term capital gain that IN TOTAL add up to the amount in Box 1.
Typically what the 1099-R looks like in this situation is: Box 1 reflects the total value of the stock that's distributed. Box 2a represents the employer's contributions over time to buy that stock, and that's what's taxed when you're done entering the the 1099-R. The Box 2a amount is also the basis for the stock if and when you sell it. The difference between the value of the stock and your basis in the stock should show up in Box 6 "Net unrealized appreciation in employer’s securities". This is typically referred to as "NUA" which stands for "Net Unrealized Appreciation".
If you immediately sell the stock (the "same day" aspect) then you tell TurboTax that the holding period is "Long Term" and you should end up with a long term capital gain that's pretty close to the 1099-R Box 6 amount. TurboTax doesn't really have a "wizard" or "step by step" interview for NUA so you'll just have to make sure you enter an acquired date that's over a year prior to the sales date and make sure the basis is the same as the 1099-R Box 2a amount.
It is possible to have short term capital gain in addition to long term capital gain when you take an "in kind" distribution out of an ESOP if you don't immediately sell the stock. If you held the stock for a while and the stock price continued to appreciate from the time of the distribution and then sold the stock after holding it less than a year, then the appreciation from the time of the distribution to the time of the sale would be considered short term and the remainder would still be considered NUA.
Perhaps you're using the wrong basis - like $0 - when you're entering the sale?
Tom Young
I am having the same problem. I received a 1099-R and a 1099-B from a life insurance contract that I invested on 11 year ago. The 1099-R is for the proceeds from the life insurance and the 1099-B is from the buy back units paid to me from the broker. I was not aware of units associated with the life insurance. From total expenses (initial cost, servicing fees, and premiums) to keep and maintain the fractional ownership of the life insurance was used to determine taxable amount on the 1099-R box 2a. Turbo tax advised to read publication 551 to determine cost basis when on form 1099-B cost basis is blank. The following is what's on publication 551: " The basis of property you buy is usually its cost. The cost is the amount you pay in cash, debt obligations, other property, or services. Your cost also includes amounts you pay for the fol-lowing items.
Sales tax.
Freight.
Installation and testing.
Excise taxes.
Legal and accounting fees (when they must be capitalized).
Revenue stamps.
Recording fees.
Real estate taxes (if assumed for the seller).You may also have to capitalize (add to basis) certain other costs related to buying or producing property". This is the only way, it seems, the program will not tax you twice. I just don't feel comfortable in using cost amount twice and prefer more advise because turbo-tax is not helping.
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