topic Attribute brokerage 1099s to another individual in Get your taxes done using TurboTax

Attribute brokerage 1099s to another individual

dbooksta — Thu, 03 Dec 2020 22:35:17 GMT

TL;DR: Broker issued a 1099 listing the SSN of taxpayer A who did not, for tax purposes, own the money in the brokerage account. The money belonged to taxpayer B. How can taxpayer B file his 1040 claiming the capital gains listed on the 1099 while at the same time ensuring taxpayer A is not assessed taxes from the 1099?

Actual scenario: In anticipation of lending my mother money to buy a house I transferred cash into a new brokerage account in her name under her SSN. However I had full management authority of "her" brokerage account. While the money was in her account I actively invested it, accumulating significant short-term capital gains. She decided not to buy a house and so I sold the stocks and transferred the cash back into an account in my name. (I.e., we did not end up establishing a loan from me to her.)

The broker must report capital gains (Form 1099-B) accumulated while the money was in my mother's account under her SSN. How can the 1099s be attributed to me when we file our individual tax returns?

We each file as Head of Household. Because of our relative tax situations this year it will be much more efficient if the gains can be attributed to me for tax purposes. (In fact, I imagine that an auditor examining the situation would argue that the titling of the funds under my mother's name should be disregarded for tax purposes because: no loan was actually made, I retained control over the funds, the transfer was reversed, and no real benefit accrued to my mother.)

Re: Attribute brokerage 1099s to another individual

Anonymous_ — Thu, 03 Dec 2020 22:56:17 GMT

@dbooksta wrote:

....How can taxpayer B file his 1040 claiming the capital gains listed on the 1099 while at the same time ensuring taxpayer A is not assessed taxes from the 1099?

Taxpayer A would report the transactions (gains) on Taxpayer A's tax return as nominee for Taxpayer B. Technically, that is done via reporting on Form 8949 with an "N" code in column (f).

See https://www.irs.gov/instructions/i8949#idm140173077083808

Re: Attribute brokerage 1099s to another individual

fanfare — Thu, 03 Dec 2020 23:06:46 GMT

IRS says-

Nominee/middleman returns. Generally, if you receive a Form 1099 for amounts that actually belong to another person, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received) for each of the other owners showing the amounts allocable to each. You must also furnish a Form 1099 to each of the other owners. File the new Form 1099 with Form 1096 with the Internal Revenue Service Center for your area. On each new Form 1099, list yourself as the “payer” and the other owner as the “recipient.” On Form 1096, list yourself as the “Filer.”

Re: Attribute brokerage 1099s to another individual

NCperson — Fri, 04 Dec 2020 01:46:30 GMT

I am far from an expert on this matter, but if the money was in an account with the mother's name on it and her social security number and the son appears to have a power of attorney to manage it, why isn't the legal owner of the money the mother? Who signed the ownership forms to open the account? Financial firms are required to 'know their customer'. Why wasn't that Mom?

let's say she died and the son is not listed as the beneficiary of the estate. who gets the money, i.e. could the son say to the beneficiary, "hey that is my money!" and the beneficiary says, "where is the loan agreement? this looks life a gift from son to Mom!"

please educate me!

Re: Attribute brokerage 1099s to another individual

Anonymous — Fri, 04 Dec 2020 09:55:40 GMT

this is an income tax forum. you're asking legal questions that are not income tax related. see a lawyer.

I can say that all states have laws regarding intestate succession.

Re: Attribute brokerage 1099s to another individual

NCperson — Fri, 04 Dec 2020 11:11:56 GMT

the only point I was trying to make with the 'legal' question is why doesn't the income tax responsibility follow the legal ownership.....

Re: Attribute brokerage 1099s to another individual

Anonymous_ — Fri, 04 Dec 2020 14:14:10 GMT

@NCperson wrote:

the only point I was trying to make with the 'legal' question is why doesn't the income tax responsibility follow the legal ownership.....

The federal tax laws are promulgated by Congress. For example, you could also inquire as to why the donee is not responsible for paying any gift tax due (on a gift) since the donee has legal ownership of the funds (or property) that was gifted by the donor.

Re: Attribute brokerage 1099s to another individual

Eddilee — Thu, 08 Feb 2024 15:14:48 GMT

Would the same answer apply for 2023? I received a 1099S belonging to my daughter on the sale of her house. I was a cosigner and received the net proceeds as payback for numerous payments I made on the house loan.

Re: Attribute brokerage 1099s to another individual

Eddilee — Thu, 08 Feb 2024 15:16:10 GMT