topic Form 1099-B - short term covered transaction - should that be "inherited" or "purchased" in the Turbotax interview? in Get your taxes done using TurboTax

Form 1099-B - short term covered transaction - should that be "inherited" or "purchased" in the Turbotax interview?

Questionasker — Thu, 06 Mar 2025 06:53:49 GMT

For inherited stock, which was later all sold on the same date, on 1099-B there is a short term covered transaction of a fraction of a share which is a realized gain (Box A short term realized gain), and there are two long term covered transactions, a loss for sale of a fraction of a share and a loss for sale of 80 shares (Box D Long Term Realized Losses).

In the TuboTax interview I selected "Inherited" for the source for all 3 transactions. However on form 8949 for the short term gain transaction there was a code T in column f, which didn't seem right. And all three transactions were listed in Part II, Long Term.

Therefore I changed the short term transaction to "purchased" and the T code no longer appears and that transaction now appears in Part I. Is that the correct way to handle that? In other words, the inherited stock had a stepped up basis and was held for over a year, and there was a fraction of a share that was added to the account before all sold, even though not directly "purchased" by us. However should that fraction of a share be designated as "purchased" rather than "inherited"?

Re: Form 1099-B - short term covered transaction - should that be "inherited" or "purchased" in the Turbotax interview?

Mike9241 — Thu, 06 Mar 2025 07:53:14 GMT

gain or loss on inherited stock should be long-term. however, if there is a dividend reinvestment program dividends paid after the date of death and reinvested in the stock get long or short-term treatment depending on date acquired and date sold. So the question is why did the brokerage indicate this as short-term.

for shares held on the date of death, inherited used as the date acquired will result in long-term treatment

if that short-term item is really long-term, code T is correct because it tells the IRS the reported type was wrong.

Re: Form 1099-B - short term covered transaction - should that be "inherited" or "purchased" in the Turbotax interview?

Questionasker — Thu, 06 Mar 2025 17:21:34 GMT

Regarding "So the question is why did the brokerage indicate this as short-term." I believe the reason would be because that fraction of a share was a dividend paid 5 months after the date of death. (date of death was June 2023, Date acquired, 1b, was November 2023, Date Sold or Disposed, 1c, was September 2024. (The other fraction of a share long term realized loss from the sale occurred 15 months after date of death.) The point I was seeking clarity on is the correct way to designate that short term gain "purchased" rather than "inherited" in the TubroTax interview? In other words, although the 80 shares were inherited would that dividend after date of death be considered "purchased" regarding it's source?

Re: Form 1099-B - short term covered transaction - should that be "inherited" or "purchased" in the Turbotax interview?

Questionasker — Fri, 07 Mar 2025 18:24:21 GMT

Would "purchased" be the correct selection of the source for that short term gain from the sale of that fraction of a share, even though the original 80 shares were all inherited? When filling in the 1099-B info in the TurboTax interview it asks "How did you receive this investment?" (Purchase: You bought the investment yourself. Inheritance: Someone died and left the investment to you.) I didn't really go out and personally "purchase" it, but in effect apparently that small short term gain is considered "purchased" if the original amount that was inherited generated a small dividend--true?

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Re: Form 1099-B - short term covered transaction - should that be "inherited" or "purchased" in t...

MarilynG1 — Wed, 12 Mar 2025 21:46:29 GMT

Yes, a dividend reinvestment used to purchase fractional shares after date of death could be considered as 'purchased' shares, rather than 'inherited' and reported as Short-Term when sold, as your 1099-B shows.

Here's more info on Dividends on Inherited Stock and also How Capital Gains are Taxed.

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