I have some foreign investment accounts. I'm doing mark-to-market and the form says to include the amount as ordinary income on my tax return. Where is the section for ordinary income?
The Mark-to-Market Election
Traders can choose to use the mark-to-market rules, investors can't. If a trader doesn't make a valid mark-to-market election under section 475(f), then he or she must treat the gains and losses from sales of securities as capital gains and losses and report the sales on Form 1040, Schedule D (PDF), Capital Gains and Losses and on Form 8949 (PDF), Sales and Other Dispositions of Capital Assets, as appropriate. When reporting on Schedule D, both the limitations on capital losses and the wash sales rules continue to apply. However, if a trader makes a timely mark-to-market election, then he or she can treat the gains and losses from sales of securities as ordinary gains and losses (except for securities held for investment - see above) that must be reported on Part II of Form 4797 (PDF), Sales of Business Property. Neither the limitations on capital losses nor the wash sale rules apply to traders using the mark-to-market method of accounting.
Any amount included in gross income under subsection (a)(1), and any gain on the sale or other disposition of marketable stock in a passive foreign investment company (with respect to which an election under this section is in effect), shall be treated as ordinary income.
(B) Loss Any—
(i) amount allowed as a deduction under subsection (a)(2), and
(ii) loss on the sale or other disposition of marketable stock in a passive foreign investment company (with respect to which an election under this section is in effect) to the extent that the amount of such loss does not exceed the unreversed inclusions with respect to such stock,
shall be treated as an ordinary loss. The amount so treated shall be treated as a deduction allowable in computing adjusted gross income.
<a rel="nofollow" target="_blank" href="https://www.law.cornell.edu/uscode/text/26/1296">https://www.law.cornell.edu/uscode/text/26/1296</a>
That helped! Then I found these instructions based on "line 21": You can report it as other income on Form 1040 line 21. Here's how to enter it in TurboTax.
· Click the Federal Taxes tab ( Personal in the Home & Business version)
· Click Wages & Income. (Personal income in the H & B version)
· Click "I'll choose what I work on."
· On the screen "Your 2015 Income Summary," scroll all the way down to the last section, "Less Common Income."
· Click the Start or Update button for the last topic, "Miscellaneous Income, 1099-A, 1099-C."
· On the next screen, "Let's Work on Any Miscellaneous Income," scroll down and click the Start or Update button for the last topic, "Other reportable income."
· The next screen asks, "Did you receive any other taxable income." Click Yes.
· On the next screen, "Other Taxable Income," enter a description and the amount. Click Continue.
· On the next screen click Done.
The income will be reported on Form 1040 line 21 with the description that you entered.
In 2020 Premier version, when I entered Section 1296 (PIFIC form 8621) LOSS under 1099-Misc - Turbo Tax generates a Schedule C and enters it there. but this is NOT a business!
Mark-to-Market gain/loss is supposed to be entered under ordinary Income. I can only enter it as a loss if I create a 1099-NEC which then correctly enters is as a loss in Schedule 1 Line 8. How can I edit the entry "non employee compensation from 1099-NEC" to "Form 8621 Section 1296?
You can enter the 1099-MISC in TurboTax as Other Common Income, which is reported on line 8 of 1040 Schedule 1 and will not generate Schedule C or SE tax. Please use the following steps:
- Click on Federal > Wages & Income.
- Scroll down to the Other Common Income section.
- Click on the Start/Revisit box next Form 1099-MISC.
- On the screen Did you get a 1099-MISC? click on the Yes button.
- On the next screen, Let's get the info from your 1099-MISC, enter the information from the 1099-MISC.
- On the following screens, answer the following questions:
- Did it involve work that's like your main job? No.
- You got it in 2020
- No, it didn't involve an intent to earn money
7. Continue through the rest of the interview screens. The income will appear as Other Income.
Many thanks for the instructions. This only works if reporting an income. I have a LOSS and 1099-MISC does not let me enter negative number. So far only way is to create a NEC but i cannot edit the entry under Sch 1, Line 8. I want to edit the TT generated text "from Non-employee compensation" to enter Section 1296 (Form 8621).
It depends. Try entering the 1099-Misc in this manner.
- Go to federal>income and expenses>all income>>show more
- Less Common Income> Start
- Miscellaneous Income,>start
- Other reportable income>start
- Next screen asks Any Other Taxable Income>yes
- The next screen will allow you to report the income with a brief explanation.
- For the explanation, you can make reference to the "1099-MISC-non-employee income." and enter the negative amount with a minus sign and amount.
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