1099-DV, 1099-B


F

FreddieFarkle

I established a UGMA mutual fund for my son many years ago. We have
used it to pay school expenses, and I have clearly treated it
incorrectly on prior tax returns in that I have claimed the income. I
now understand the proceeds of the stock redemption in 2007 should go
on my son's tax return. Total income with the stock redemption
proceeds will total $5975.44, so tax consequences are not relevant. I
just want to put things where they belong on the tax return.

I have two 1099-DIVs and one 1099-B from the mutual fund company. I
get where the 1099-DV amounts should go on the 1040. Its the 1099-B
that is confusing me. Box 2 is $3500, the gross proceeds. On the back
of the 1099-B it tells me that this amount goes on Schedule D. So I
should just slap the $3500 in item F?

Thanks
 
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R

Rich Carreiro

[Original poster asks about tax treatment of income from
an UGMA]
I have two 1099-DIVs and one 1099-B from the mutual fund company. I
get where the 1099-DV amounts should go on the 1040.
Assuming they total to less than $1500, the DIVIDENDS reported
on them go to the "Dividends" line of 1040 (9a, I believe) and the
QUALIFIED DIVIDENDS reported on them go to the "Qualified Dividends"
line of 1040 (9b, I believe). If the 1099-DIV also reports any
capital gain distributions, those will go on the "Capital Gain
Distributions" line in the long-term section of Schedule D.
Its the 1099-B that is confusing me. Box 2 is $3500, the gross
proceeds. On the back of the 1099-B it tells me that this amount
goes on Schedule D. So I should just slap the $3500 in item F?
Intentionally oversimplifying, the $3500 goes in the "Proceeds"
column of Sched D, what was paid for the fund goes in the "Basis"
column of Sched D, and Proceeds minus Basis gives you the gain
(or loss) on the sale.

However, it's a bit more complicated than that. You need to
figure out how many shares of the fund (if any) were purchased
less than one year before the sale. Yes, you bought the fund
many years ago, but if distributions have been reinvested, then
you'll likely have some shares held less than a year. You'll
need to allocate the proceeds and basis proportionally between
shares held less than a year and shares held more than a year
and report them in the short-term and long-term sections of
Sched D respectively.
 
P

Phil Marti

FreddieFarkle said:
I have two 1099-DIVs and one 1099-B from the mutual fund company.
Make sure one of those isn't a corrected version of the other.
I
get where the 1099-DV amounts should go on the 1040. Its the 1099-B
that is confusing me. Box 2 is $3500, the gross proceeds. On the back
of the 1099-B it tells me that this amount goes on Schedule D. So I
should just slap the $3500 in item F?
That's where you start. You have to provide the basis and holding period
information. See the Schedule D instructions and IRS Publication 564.
 
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M

Mark Bole

FreddieFarkle said:
I established a UGMA mutual fund for my son many years ago. We have
used it to pay school expenses, and I have clearly treated it
incorrectly on prior tax returns in that I have claimed the income. I
now understand the proceeds of the stock redemption in 2007 should go
on my son's tax return. Total income with the stock redemption
proceeds will total $5975.44, so tax consequences are not relevant.
Not sure what you mean by "not relevant". As the other replies
indicated, you need to determine what the gain (or loss) is on the $3500
stock sale.

But the other $2500, even if the stock gain is zero, sounds like
investment income which is not only taxable for your son, but amounts
over $1700 are subject to "kiddie tax" and taxed at your rate, assuming
he is your dependent and has no earned income.

-Mark Bole
 

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