Income Tax Filing Requirement

[dyne]

It appears to me that GROSS stock sales ARE included in Gross Income to determine if a taxpayers is required to file income tax returns. The same is true of gross proceeds reported on a form
1099-S even if the gain is excluded from income under Section 121 AND gross amounts reported on a 1099-R even if it is ALL rolled over and none of it is taxable. Am I correct?

[WhiteOleander]

I would agree on both counts. The return must be filed to show why reported income is not taxable in full.

[Gary2]

Along with gross rents received, even if the Sch. E winds up with a loss.

I think the same is true for the Gross Income line on a Schedule C (i.e. gross receipts and other revenue minus COGS and returns and allowances, but no other deductions).

[New York Enrolled Agent]

It appears to me that GROSS stock sales ARE included in Gross Income to determine if a taxpayers is required to file income tax returns. The same is true of gross proceeds reported on a form
1099-S even if the gain is excluded from income under Section 121 AND gross amounts reported on a 1099-R even if it is ALL rolled over and none of it is taxable. Am I correct?

The IRS says otherwise with respect to 1099-B forms..

The requirement to file a tax return is triggered by the amount of gross income. As per §61(a)(3) it specifically states gross income includes gains from dealings in property.

You can read SCA 200018051 where the IRS concludes gross proceeds are not the determining factor in whether or not a return is required to be filed. Even though it is not required, some practitioners feel it is best to file to avoid possible problems.

I'm not sure you can reach the same conclusion in your comment about 1099-R forms. §61 does include pensions and annuities as gross income. I think the amount the taxpayer receives is gross income as per §61 but the same income can be excluded as per §408(d). I can see how some could argue otherwise using the language in §408(d) but I have not seen anything on point such as the above referenced SCA.

[dyne]

Technically only the GAIN or loss on sale of stock is to be reported. However it was
reported on this or another tax message board that a taxpayer omitted gross
stock sales and IRS issued a CP-2000 proposing to assess additional tax allowing
NO cost of the stock. So as a practical matter we SHOULD include GROSS sales
in determing whether or not a tax return should be filed. I considered saying this in
my original post but did not as it complicated my comment.

[JG EA]

Interesting that the continuing debate about whether to file or not file because of stock sales will be a moot point because the cost will be reported to the IRS. Then they will know the GAINS from sales.

[DonPriebe]

Interesting that the continuing debate about whether to file or not file because of stock sales will be a moot point because the cost will be reported to the IRS. Then they will know the GAINS from sales.

But that will be a L-O-N-G time in the future since stocks purchased before 2011 will NEVER become covered securities subject to mandatory basis disclosure. Ditto for mutual funds and 2012, bonds and 2013.

By the way, if the requirement to file is actually based on gain, do we think it is based on a single trade or the sum of all trades in a given year?

[erchess]

Answer to Don and a question.

I think it is the net outcome of your trades in the taxable year. Whether I am right or wrong on that I want to know whether the fact of a capital loss carryforward is relevant in determining a filing requirement. I would guess that it is not because without returns the IRS could not manage to keep up with your growing or declining carryforward balance.