Undetermined Long Term Transactions

[LaughTrack]

I have a sum reported on a 1099 B which my brokerage says is undetermined but their additional information says is "principal payment."   I think this is a repayment on a REMIC from an inherited account, but I'm not sure.  Do I owe taxes on this sum?

[HelenC12]

Yes, the gain on the stock sale is taxable to you. You'll need to enter a cost or other basis for the stock otherwise you'll be taxed on 100% of the gain. If you inherited this "REMIC", the cost basis of inherited stock is generally the market price of the stock on the date that the benefactor died.

• In rare cases, the executor of the estate will make a special election to treat the stock differently. Check with the executor to be sure.

Related Information:

• How do I find a stock's cost basis if I don't know when it was purchased?
• How do I find a stock's cost basis?
• How do I determine the cost basis of stock I received as a gift?

[LaughTrack]

Helen -

Thanks, but this isn't a sale I initiated and on my 1099-B, it occurred each month (in different amounts) over 7 months and the "additional information" from the brokerage firm says it is "principal payment."   Isn't that more likely a return of principal?  The quantity listed for each month is the same and isn't reduced even though proceeds are reported.

[LaughTrack]

I've now checked my Annual Statement from this broker and it clearly describes the $ involved as "Return of Principal."   As such, I have no idea why the broker's tax statement lists is as proceeds and reports in as "Undetermined" on 1099-B.   I'm also mildy disappointed that TurboTax doesn't seem to support a filing of form 8949, which I have never before encountered.

[JulieS]

Brokers are required to report redemptions of assets as sales even if the amount is a return of principle. 

Any amount listed as gross proceeds on a 1099-B must be reported by you on your tax return.

To report these transactions, use the dates and gross proceeds from the 1099-B. For the basis, use the same figure as the gross proceeds. This will allow you show the gross proceeds, but the net gain will be $0. 

[LaughTrack]

OK, thanks. I also have to fill in Form 8949. I don't see that TurboTax helps me with this. Do I have this correctly?

[JillS56]

After you enter your transactions, TurboTax will create the 8949 for you.   

[LaughTrack]

Interesting.  It hasn't done so so far.  It has simply said I need to fill out 8949 and file it.  I am using the downloadable version.   

[JillS56]

The steps for creating the form Form 8949 you need to go to:

1. Income and Expenses in the Federal section;
2. Scroll down to Investment Income
3. Select Stocks, Cryptocurrency, Mutual Funds, Bonds, Other
4. Select Start
5. Begin entering your transactions from  your Form 1099-B.

This will create the 8949.  

When finished entering the transactions from the Form 1099-B you can switch to Forms mode and look through the list of forms for Form 8949.

[LaughTrack]

I'm not sure we are using the same version of TurboTax.   I am using the Downloadable Home and Business version.   Event though I have entered the information, no 8949 has been created.   I being told I must mail a completed 8949 to the IRS and told:  "To finish reporting these sales, follow mailing instructions.   The hotlink to mailing instructions says this:

Mailing Instructions

Take a moment to double-check that your statements are complete. For each sale listed, there should be:

- A Description
- Date Acquired
- Date Sold
- Sales Price
- Cost Basis
- Gain or loss for each sale
- A sale category based on how the sale was reported to you and the IRS

In some uncommon cases, there will be an adjustment code and adjustment amount.

NOTE: Any sales summaries that include only Box A or Box D sales, and which have no adjustments to gain/loss, do not need to be included on a statement mailed to the IRS.

Here's how to mail your statements:

If you are e-filing your tax return, then mail your statements along with Form 8453 to:

Internal Revenue Service
Attn: Shipping and Receiving, 0254
Receipt and Control Branch
Austin, TX [removed]

If you are not e-filing, then mail your statements with your entire tax return to your local IRS office.

Finally, in downloading 8949 and its instructions, I don't see how I can fill in the form to show that the distribution was a "Return of Principal"

Thanks for your patience with me, and for your continued help.

[DianeW777]

A Form 8949 is not created if it is not needed. In this case you do not need to mail anything to the IRS if this Form is not part of your tax return.

In your situation, the cost basis should be the same as the sell price (return of capital) until you have used up all of your cost basis.  The cost basis is very important for you to track and information was provided by our Tax Expert @HelenC12 about that.

Any return of capital be treated this way until you no longer have a cost basis, at which point it will become a fully taxable event. 

When is Form 8949 required? It is required in the following situations.

Individuals. Individuals use Form 8949 to report the following (if you did not have one of these situations it will not be needed).

• The sale or exchange of a capital asset not reported on another form or schedule.

• Gains from involuntary conversions (other than from casualty or theft) of capital assets not used in your trade or business.

• Nonbusiness bad debts.

• Worthlessness of a security.

• The election to defer capital gain invested in a qualified opportunity fund (QOF).

• The disposition of interests in QOFs.

[LaughTrack]

Thanks, but TurboTax is telling me I do have to submit 8949 on my uncovered transactions.  I originally reported them as a category, but I can switch to report them individually, though I don't see "Return of Capital" as an option even though that is what is going on on the most complex one (inherited several years ago) where I had a return of capital every month for seven months.   Will switching to reporting them individually eliminate 8949?

[DianeW777]

The simplest thing would be to select Form 8949, which may already be completed by TurboTax, then attach a copy of the Form 1099-B with the Form 8453 and mail it to the IRS at the address indicated.  I wouldn't take the time to change your entries if you know they are already accurate.

[LaughTrack]

Unfortunately, TurboTax is  giving me neither of those forms.   I can get them from the IRS.  I am going to try entering the sales individually, not as a category, and see if that helps.

[DianeW777]

Yes, if you are e-filing your tax return, then mail your statements along with Form 8453 to: 

Internal Revenue Service

Attn: Shipping and Receiving, 0254 

Receipt and Control Branch 

Austin, TX 73344-0254

If you need a blank Form 8453, you can download this pdf, enter your address information and check the box for Form 8949 (this form is really just a cover sheet)

Let me know how it works out on the re-entry if you would.

@LaughTrack