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Reporting return of principle

 
 
jo
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      03-23-2008, 03:12 PM
Is it necessary to report return of principle on Schedule D? It
always nets to 0, so has no effect on the bottom line. However, it is
broken down in my broker's 1099, so total proceeds from broker would
not match the government's value (assuming they are given this for
auditing) if I don't report them. It's such a tedious operation,
especially now that it appears that Turbo Tax is throwing all
transactions without a purchase date (all the ROPs) into short term
gains when you import.

jo

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joetaxpayer
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      03-23-2008, 05:03 PM
jo wrote:
> Is it necessary to report return of principle on Schedule D? It
> always nets to 0, so has no effect on the bottom line. However, it is
> broken down in my broker's 1099, so total proceeds from broker would
> not match the government's value (assuming they are given this for
> auditing) if I don't report them. It's such a tedious operation,
> especially now that it appears that Turbo Tax is throwing all
> transactions without a purchase date (all the ROPs) into short term
> gains when you import.


I hope I am not misreading the question. The proceeds of a stock sale is
always the gross amount. If you buy a stock at $100 and sell for $100,
you cannot ignore the transaction, you must report the full $100 sale
and since you enter the cost of $100, the result is $0.
The IRS matches up the gross proceeds, so that's what you must make sure
you reconcile fully. You use the phrase 'return of principle' which
really doesn't apply to stock transactions. Which is why I suspect I
misunderstood.
Joe
www.blog.joetaxpayer.com

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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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jo
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      03-23-2008, 06:40 PM
On Mar 23, 1:03*pm, joetaxpayer <(E-Mail Removed)> wrote:
> jo wrote:
> > Is it necessary to report return of principle on Schedule D? *It
> > always nets to 0, so has no effect on the bottom line. *However, it is
> > broken down in my broker's 1099, so *total proceeds from broker would
> > not match the government's value (assuming they are given this for
> > auditing) if I don't report them. *It's such a tedious operation,
> > especially now that it appears that Turbo Tax is throwing all
> > transactions without a purchase date *(all the ROPs) into short term
> > gains when you import.

>
> I hope I am not misreading the question. The proceeds of a stock sale is
> always the gross amount. If you buy a stock at $100 and sell for $100,
> you cannot ignore the transaction, you must report the full $100 sale
> and since you enter the cost of $100, the result is $0.
> The IRS matches up the gross proceeds, so that's what you must make sure
> you reconcile fully. You use the phrase 'return of principle' which
> really doesn't apply to stock transactions. Which is why I suspect I
> misunderstood.
> Joewww.blog.joetaxpayer.com
>


These transactions were for bonds and unit trusts, not stocks. They
appear in the proceeds from broker, so I guess my instinct that they
must be reported was accurate. I've done it that way before, and the
only reason I was going down this path was because when I imported
them into Turbotax, they all ended up in the Short Term gain category
and it was confusing as to how to get them out of there. I've since
found a worksheet for imported transactions that will do that, but
it's still annoying. Wish purchase dates and cost values for simple
transactions got captured so this didn't happen. You'd think the
brokerages would be able to download this information since it shows
up on their own records.


jo





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> << ------------------------------------------------------- >>
> << The foregoing was not intended or written to be used, * >>
> << nor can it used, for the purpose of avoiding penalties *>>
> << that may be imposed upon the taxpayer. * * * * * * * * *>>
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> << * The Charter and the Guidelines for submitting posts * >>
> << *to this newsgroup as well as our anti-spamming policy *>>
> << * * * * * * * * *are atwww.asktax.org. * * * * * * * * >>
> << * * * * Copyright (2007) - All rights reserved. * * * * >>
> << ------------------------------------------------------- >>


--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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Paul Thomas
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      03-24-2008, 12:42 AM

"jo" <(E-Mail Removed)> wrote
>> > Is it necessary to report return of principle on Schedule D? It
>> > always nets to 0, so has no effect on the bottom line. However, it is
>> > broken down in my broker's 1099, so total proceeds from broker would
>> > not match the government's value (assuming they are given this for
>> > auditing) if I don't report them. It's such a tedious operation,
>> > especially now that it appears that Turbo Tax is throwing all
>> > transactions without a purchase date (all the ROPs) into short term
>> > gains when you import.

>>
>> I hope I am not misreading the question. The proceeds of a stock sale is
>> always the gross amount. If you buy a stock at $100 and sell for $100,
>> you cannot ignore the transaction, you must report the full $100 sale
>> and since you enter the cost of $100, the result is $0.
>> The IRS matches up the gross proceeds, so that's what you must make sure
>> you reconcile fully. You use the phrase 'return of principle' which
>> really doesn't apply to stock transactions. Which is why I suspect I
>> misunderstood.
>> Joewww.blog.joetaxpayer.com
>>

>
> These transactions were for bonds and unit trusts, not stocks. They
> appear in the proceeds from broker, so I guess my instinct that they
> must be reported was accurate. I've done it that way before, and the
> only reason I was going down this path was because when I imported
> them into Turbotax, they all ended up in the Short Term gain category
> and it was confusing as to how to get them out of there.






You date the buy date and sell date accurately, and they appear as long - or
short term as appropriate.




--
Paul A. Thomas, CPA
Athens, Georgia

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
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BeanTownSteve
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      03-24-2008, 05:27 PM
On Mar 23, 8:42 pm, "Paul Thomas" <(E-Mail Removed)> wrote:
> "jo" <(E-Mail Removed)> wrote
>
>
>
> SNIP
>
> > These transactions were for bonds and unit trusts, not stocks. They
> > appear in the proceeds from broker, so I guess my instinct that they
> > must be reported was accurate. I've done it that way before, and the
> > only reason I was going down this path was because when I imported
> > them into Turbotax, they all ended up in the Short Term gain category
> > and it was confusing as to how to get them out of there.

>
>SNIP>

Not sure about the unit trusts but I would think it unusual for
bond(s) to be sold for
exactly it's purchase price. Not only does the instrument change in
value due to both time and market
conditions, there's also commissions and fees etc. (I assume) that
will alter the net proceeds.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
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jo
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      03-24-2008, 05:30 PM
On Mar 23, 8:42*pm, "Paul Thomas" <(E-Mail Removed)> wrote:
> "jo" <(E-Mail Removed)> wrote
>


> >> > Is it necessary to report return of principle on Schedule D? It
> >> > always nets to 0, so has no effect on the bottom line. However, it is
> >> > broken down in my broker's 1099, so total proceeds from broker would
> >> > not match the government's value (assuming they are given this for
> >> > auditing) if I don't report them. It's such a tedious operation,
> >> > especially now that it appears that Turbo Tax is throwing all
> >> > transactions without a purchase date (all the ROPs) into short term
> >> > gains when you import.

>
> >> I hope I am not misreading the question. The proceeds of a stock sale is
> >> always the gross amount. If you buy a stock at $100 and sell for $100,
> >> you cannot ignore the transaction, you must report the full $100 sale
> >> and since you enter the cost of $100, the result is $0.
> >> The IRS matches up the gross proceeds, so that's what you must make sure
> >> you reconcile fully. You use the phrase 'return of principle' which
> >> really doesn't apply to stock transactions. Which is why I suspect I
> >> misunderstood.
> >> Joewww.blog.joetaxpayer.com

>
> > These transactions were for bonds and unit trusts, not stocks. *They
> > appear in the proceeds from broker, so I guess my instinct that they
> > must be reported was accurate. *I've done it that way before, and the
> > only reason I was going down this path was because when I imported
> > them into Turbotax, they all ended up in the Short Term gain category
> > and it was confusing as to how to get them out of there.

>
> You date the buy date and sell date accurately, and they appear as long - or
> short term as appropriate.
>
> --
> Paul A. Thomas, CPA
> Athens, Georgia
>


If I were working from a manually entered Schedule D in Turbo Tax, I
would have known how to easily change it, in the manner you indicate.
Instead, I imported my Sched transactions from my broker and Turbo Tax
doesn'tmake it obvious how to get to the worksheet that is the source
for the data that appears on Sched D. You can't right click on any
transaction and be shown the option to go to the Imported transactions
worksheet (new to me, altho I know I did this two years ago). I don't
know how I found it, frankly... stumbled around a bit... but I've got
everything fixed. The bottom line is that I couldn't edit them
directly on the TT Schedule D, so had to do a lot of searching to find
where I could do this editing.

jo


> --
> << ------------------------------------------------------- >>
> << The foregoing was not intended or written to be used, * >>
> << nor can it used, for the purpose of avoiding penalties *>>
> << that may be imposed upon the taxpayer. * * * * * * * * *>>
> << * * * * * * * * * * * * * * * * * * * * * * * * * * * * >>
> << * The Charter and the Guidelines for submitting posts * >>
> << *to this newsgroup as well as our anti-spamming policy *>>
> << * * * * * * * * *are atwww.asktax.org. * * * * * * * * >>
> << * * * * Copyright (2007) - All rights reserved. * * * * >>
> << ------------------------------------------------------- >>- Hide quoted text -
>
> - Show quoted text -



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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
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Bill
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      03-24-2008, 06:22 PM

(E-Mail Removed) (BeanTownSteve) posted:

>On Mar 23, 8:42 pm, "Paul Thomas"
><(E-Mail Removed)> wrote:


>"jo" <(E-Mail Removed)> wrote
>>SNIP
>>These transactions were for bonds and unit
>>trusts, not stocks. They appear in the
>>proceeds from broker, so I guess my instinct
>>that they must be reported was accurate. I've
>>done it that way before, and the only reason I
>>was going down this path was because when
>>I imported them into Turbotax, they all ended
>>up in the Short Term gain category and it
>>was confusing as to how to get them out of
>>there.
>>SNIP>


>Not sure about the unit trusts but I would think
>it unusual for bond(s) to be sold for
>exactly it's purchase price. Not only does the
>instrument change in value due to both time
>and market conditions, there's also
>commissions and fees etc. (I assume) that will
>alter the net proceeds.


Many muni bonds -- which are often combined into unit trusts -- have a
callable feature after a particular time period (especially if they're
marketed during a time of high yields). They are then invariably called
-- often at par -- as soon as that minimum period has ended, and a new
issue at prevailing lower yields is then issued to replace the
principal.

This frequently results in a return of principal -- with no gain
involved. I watched shares of a municipal bond unit trust I bought in
the mid-1980s, slowly disappear, as one issue after another reached its
callable date during the early 90s. The entire trust -- comprised of
"20-year _callable_ munis" had been dissolved by the mid-1990s ... or
less than 10 years from when I bought the original issue.

Almost all transactions were recorded as "return of principal." Only in
one or two instances (out of hundreds or bond issues) was there a
premium paid for an early call -- which in those rare instances, was
properly recorded as an LT gain.

I've also had individual munis (which were my original investments --
back in the days when Federal +State Income Taxes totaled more than 50%)
called at par. In fact, every one I bought dissolved within 5 years
(and why not, since they were doubly-exempt -- Fed and State -- and
paying around 10%).

Bill

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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
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