USA 1099 and Negative Gross Proceeds

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One of my 1099 statements, from a major brokerage firm, reports a negative value for gross proceeds on the sale of an option and then reports the cost basis as 0. The reality is that I received money when I sold the option (to open the position) and I had to pay money to buy it back. The way they do it should be fine because in the case of a loss, they report the gross proceeds as the value of the loss. Let me illustrate this with an example( The numbers are made up): An investor sells a call for $300 and then buys back the call for $500. They will report gross proceeds of $ -200 and a cost basis of 0. Hence, in both cases, the loss is the same.


This works fine for Federal Income tax purposes but when it comes to the state of NJ(the state that I live in), I cannot enter a negative number for the gross proceeds. I called the state and they said that was not allowed. I am doing my taxes using Turbo Tax and Turbo tax produces an error. Do you think the 1099 is bad? I also feel that when I report for the gross proceeds on my Federal Tax return should match the 1099 generated by the broker. I also feel that my Federal incomes tax return should match my state income tax return.

What should I do?

Bob
 
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Thanks for the response. I did and he says that it is right. I am thinking it is wrong. Do you think it is wrong?

Bob
 

Samir

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I wouldn't trust tax software. Use the state's free online system for filing. And double-check their rules on these type of sales and if federal 1099s can be used for the proceeds and basis. Some states require their own tax statements.
 

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