Reporting return of principle

Discussion in 'Tax' started by jo, Mar 23, 2008.

  1. jo

    jo Guest

    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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    jo, Mar 23, 2008
    #1
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  2. jo

    joetaxpayer Guest

    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

    --
    << ------------------------------------------------------- >>
    << 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. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    joetaxpayer, Mar 23, 2008
    #2
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  3. jo

    jo Guest

    On Mar 23, 1:03 pm, joetaxpayer <> 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





    > --
    > << ------------------------------------------------------- >>
    > << 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. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    jo, Mar 23, 2008
    #3
  4. jo

    Paul Thomas Guest

    "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.






    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. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Paul Thomas, Mar 24, 2008
    #4
  5. On Mar 23, 8:42 pm, "Paul Thomas" <> wrote:
    > "jo" <> 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. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    BeanTownSteve, Mar 24, 2008
    #5
  6. jo

    jo Guest

    On Mar 23, 8:42 pm, "Paul Thomas" <> 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.

    >
    > 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 -



    ========================================= MODERATOR'S COMMENT:
    Please delete all unnecessary parts of the prior message when responding.

    --
    << ------------------------------------------------------- >>
    << 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. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    jo, Mar 24, 2008
    #6
  7. jo

    Bill Guest

    (BeanTownSteve) posted:

    >On Mar 23, 8:42 pm, "Paul Thomas"
    ><> wrote:


    >"jo" <> 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

    --
    << ------------------------------------------------------- >>
    << 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. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Bill, Mar 24, 2008
    #7
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