Form 8949 (X) on 1099-B

[paulgolson]

My brokerage account 1099-B has Parts I and II, but there is also a section for "other transactions" called 8949 (X). The sale of these stocks on the 1099-B were from an inheritance 4 years ago.  About 3 years ago, 1 of the stocks spun off into 3 separate new corporations. There is no cost basis for these shares (it shows n/a). It also states that the cost basis was not reported to the IRS. How do I treat this and enter it into Turbotax?

[JamesG1]

I suspect that the stocks do have a cost basis that you may use to offset against the sales price.  Most likely, the stock basis is the fair market value of the stock on the date of death.  This would be the closing stock price on the date of death.

You may be able to do the research yourself by using a tool returned under a Google search for 'historical stock price lookup tool'.

The stock spun into three stocks would retain the basis of the original stock.  So if the cost basis of stock A was $30 / share and it was spun into three stocks, the total of the three stocks would be valued at $30.  Such as here:

    Stock A @ $30 becomes:  Stock B @ $10, Stock C @ $10, Stock D @ $10.

Per IRS Publication 551 (page 10), the basis of property inherited from a decedent is generally one of the following.

1. The fair market value (FMV) of the property at the date of the individual's death.
2. The FMV on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation. 
3. The value under the special-use valuation method for real property used in farming or a closely held business if chosen for estate tax purposes. 
4. The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement.

Perhaps the estate administrator can give guidance on what date and value was used for estate purposes?

The transactions may be entered by stock section summary information total or on a line-by-line basis.

In TurboTax Online, you may enter the summary information instead of each individual transaction.  Create a .PDF of the IRS form 8949 to upload into TurboTax Online.  Follow these steps.       

1. Down the left side of the screen, click Federal.
2. Down the left side of the screen, click Wages & Income.
3. Click the down arrow to the right of Investments and Savings.
4. Click to the right of Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B).
5. Click Add investments.
6. On the Let's import your tax info screen, select Enter a different way.
7. On the OK, let's start with one investment type screen, select Stocks, Bonds, Mutual Funds, then Continue.
8. At the screen Which bank or brokerage, enter the information.  Click Continue.
9. Do these sales include any employee stock, enter No.
10. Do you have more than three sales, enter Yes.
11. Do these sales include any other types of investments, enter No.
12. Did you buy every investment listed, enter Yes.  Continue.
13. On the screen Now, choose how to enter your sales, select One by one.  Select Continue.
14. At the screen Look for your sales on your 1099-B, select Continue.
15. You will now be able to enter your sale information.
16. OR at the screen Now, choose how to enter your sales, select Sales Section Totals.
17. Select Continue.
18. At the screen Look for your sales on your 1099-B, select Continue.
19. You will now be able to enter the total proceeds (sales) and cost basis, along with the sales category. Refer to your IRS form 1099-B, IRS form 8949 and / or Schedule D Capital Gains and Losses for the amounts and category. When finished, select Continue
20. You can add additional sales totals by selecting the Add another sales total on the Review your sales section totals screen.
21. When completed, close the record and click Continue.
22.  At the screen Now, we'll help you upload your 1099-B since the IRS requires a copy, browse and select your document.  Select Continue.
23. When you upload your document, your filing instructions will not show that anything needs to be mailed in, and no IRS form 8453 will be generated.

[JamesG1]

I suspect that the stocks do have a cost basis that you may use to offset against the sales price.  Most likely, the stock basis is the fair market value of the stock on the date of death.  This would be the closing stock price on the date of death.

You may be able to do the research yourself by using a tool returned under a Google search for 'historical stock price lookup tool'.

The stock spun into three stocks would retain the basis of the original stock.  So if the cost basis of stock A was $30 / share and it was spun into three stocks, the total of the three stocks would be valued at $30.  Such as here:

    Stock A @ $30 becomes:  Stock B @ $10, Stock C @ $10, Stock D @ $10.

Per IRS Publication 551 (page 10), the basis of property inherited from a decedent is generally one of the following.

1. The fair market value (FMV) of the property at the date of the individual's death.
2. The FMV on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation. 
3. The value under the special-use valuation method for real property used in farming or a closely held business if chosen for estate tax purposes. 
4. The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement.

Perhaps the estate administrator can give guidance on what date and value was used for estate purposes?

The transactions may be entered by stock section summary information total or on a line-by-line basis.

In TurboTax Online, you may enter the summary information instead of each individual transaction.  Create a .PDF of the IRS form 8949 to upload into TurboTax Online.  Follow these steps.       

1. Down the left side of the screen, click Federal.
2. Down the left side of the screen, click Wages & Income.
3. Click the down arrow to the right of Investments and Savings.
4. Click to the right of Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B).
5. Click Add investments.
6. On the Let's import your tax info screen, select Enter a different way.
7. On the OK, let's start with one investment type screen, select Stocks, Bonds, Mutual Funds, then Continue.
8. At the screen Which bank or brokerage, enter the information.  Click Continue.
9. Do these sales include any employee stock, enter No.
10. Do you have more than three sales, enter Yes.
11. Do these sales include any other types of investments, enter No.
12. Did you buy every investment listed, enter Yes.  Continue.
13. On the screen Now, choose how to enter your sales, select One by one.  Select Continue.
14. At the screen Look for your sales on your 1099-B, select Continue.
15. You will now be able to enter your sale information.
16. OR at the screen Now, choose how to enter your sales, select Sales Section Totals.
17. Select Continue.
18. At the screen Look for your sales on your 1099-B, select Continue.
19. You will now be able to enter the total proceeds (sales) and cost basis, along with the sales category. Refer to your IRS form 1099-B, IRS form 8949 and / or Schedule D Capital Gains and Losses for the amounts and category. When finished, select Continue
20. You can add additional sales totals by selecting the Add another sales total on the Review your sales section totals screen.
21. When completed, close the record and click Continue.
22.  At the screen Now, we'll help you upload your 1099-B since the IRS requires a copy, browse and select your document.  Select Continue.
23. When you upload your document, your filing instructions will not show that anything needs to be mailed in, and no IRS form 8453 will be generated.

[paulgolson]

@JamesG1 JamesG1

Thank you for your informative reply. I have a couple of questions on it.

First, since 2 of the 3 spinoffs for the original stock inheritance did not exist at the time of inheritance, I have looked up the 3 stocks and have determined their closing prices when I got them 3 years ago. Since these were not reported to the IRS on the 1099-B, I have entered all the proceeds and calculated the cost basis myself for each of the 3 "Other Transactions". I have classified them as "Box (E) Long-term transactions reported on Form(s) 1099-B showing basis wasn’t reported to the IRS".  I also checked off in TurboTax that for those 3 items, my 1099-B had a missing/incorrect tax basis. 

Does this sound like I have handled it correctly?

Secondly, do I need to send in 8949 or 1099-Bs showing my calculations or any other info regarding these 3 stocks to the IRS?

Thanks for your help!

[paulgolson]

@JamesG1  

Adding to my 2 new questions, I wanted to state that I am e-filing my Federal tax.

Thanks.

[JamesG1 · Accepted solution]

Yes, the entry sounds correct. 

The transactions would be considered long-term and basis not reported to the IRS.  Code E is correct.

You entered the transactions One by one at the screen Now, choose how to enter your sales.

Retain all documentation including the 8949X and the paperwork that computes the cost basis.  

It is possible that a tax authority may have a question at a later time.