Solved: I was divorced last year and had some capital gains before the divorce. Should I split those gains with my ex-wife on my tax return?
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I was divorced last year and had some capital gains before the divorce. Should I split those gains with my ex-wife on my tax return?

 
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Expert Alumni

I was divorced last year and had some capital gains before the divorce. Should I split those gains with my ex-wife on my tax return?

If the account was jointly owned at the time of the transactions, then you can choose to split the transactions in half for each of you to report.  This assumes there is no plan of action included in the divorce papers for this account.  If the Form 1099B was issued in only one social security number, you may expect that the IRS might inquire about that tax return at some point in the future.  You can explain at that time that each of you reported half of the sales/transactions. 

Or you can choose to use a nominee action as shown below.

Nominee returns. Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received).  You must also furnish a Form 1099 to each of the other owners. File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area.

  • On each new Form 1099list your deceased daughter as the payer (name, deceased) and the other owner, as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.

The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms here:  Click here to order forms or publications from the IRS or click below to print the forms.

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Expert Alumni

I was divorced last year and had some capital gains before the divorce. Should I split those gains with my ex-wife on my tax return?

If the account was jointly owned at the time of the transactions, then you can choose to split the transactions in half for each of you to report.  This assumes there is no plan of action included in the divorce papers for this account.  If the Form 1099B was issued in only one social security number, you may expect that the IRS might inquire about that tax return at some point in the future.  You can explain at that time that each of you reported half of the sales/transactions. 

Or you can choose to use a nominee action as shown below.

Nominee returns. Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received).  You must also furnish a Form 1099 to each of the other owners. File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area.

  • On each new Form 1099list your deceased daughter as the payer (name, deceased) and the other owner, as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.

The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms here:  Click here to order forms or publications from the IRS or click below to print the forms.

View solution in original post

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