I have ESPP and RSU employee stock sales reported by Etrade / Morgan Stanley. Since Etrade was acquired by Morgan Stanley mid-year 2023, I have two 1099-Bs. When doing a federal taxes check, Turbotax reports the following error:
Form 1099-B Worksheet (MORGAN STANLEY CAPITAL MGMT) -- Capital Asset Sales Wksht (1): Adjustment Amount must have a value when an adjustment code (other than C, M, or T) is entered.
There are 2 Capital Sales Asset Worksheets —both from data imported online from etrade/Morgan Stanley. One worksheet has the stock transactions from the earlier part of the year — before the acquisition of Etrade by Morgan Stanley — and the other worksheet has the transactions after the acquisition. On the Capital Asset Sales worksheet for the transactions for after the acquisition I can see this is related to an ESPP stock sale transaction. How do I get this error to go away?
The transactions from before the acquisition only have adjustment codes “B”. The transactions from after the acquisition all have adjustment codes “BN”. According to IRS worksheet instructions, the code N is for a Form 1099-B or 1099-S (or substitute statement) as a nominee for the actual owner of the property.
That's not the case here. I checked the 1099s from Etrade/Morgan Stanley, and there's no indication about trustee sale on the PDF.
Looking at the two worksheets side by side in Turbotax, I can see differences in the Sale Results where the worksheet of the earlier transactions have only Adjustment Codes “B” and no values in the Quick Entry table Adjustment Amount or Adjustment Code fields. I tried to edit the worksheet with the “BN” transactions via the Quick Entry table to delete the "N", but the "N" comes back when I leave the field. If I change the quick entry with the "N” codes to have only “B” for the ESPP transaction, the gain is incorrect, and my taxes go up a lot! I have entered a negative adjustment amount and adjustment code “B” so the transaction “looked’ correct, and that seems to have the correct Gain/Loss on the ESPP transaction. The other transactions — all RSU— still have codes “N” but at least the gain/loss info looks correct and consistent with the transactions on the other worksheet from earlier in the year and also with the stock plan supplement. But, I still end up with an error during the federal taxes review where it now complains, “Adjustment code(s): Adjustment codes(s) should not contain B when the incorrect basis box is also checked in Individual Adjustments. Adjustment codes(s) B”
