cmo's & remics

[lovesledz]

A client came in with a 1099-B that reports 12 monthly sales and the only information provided is the date of sale, the amount, and that it is principal. All other items on the form are marked "unknown". I believe this is a cmo or remic, and the investment was purchased from the broker reporting it. I called the broker to request more information and they are either unable or unwilling to help me. They suggested that I should be able to report this with the information provided; that it is my job as a tax preparer to figure it out. The only thing my client can tell me is the date of his original investment; some 18 months ago. With the amount of information I have, I have no idea how to report this. Any help will be greatly appreciated.

[JohnH]

I can't tell you how to report it because I don't have time right now and I suspect you don't either. But I can tell you what I'd do.

I'd work up an estimate based on the entire amount being taxable and tell the client that's his worst-case scenario. We're filing an extension based on that estimate. If he owes money, he will need to send a check to IRS or be prepared to pay about 1% penalty & interest on any unpaid balance when the return is completed. (The extension relieves him of a 5% per month penalty for late filing only)

I'd then tell him that after the 17th, we can revisit this and see if there's any way to reduce the tax liability. If he questions my approach, I'd tell him the problem arises because his broker is either too inept or too lazy to provide proper documentation. And they're so uncooperative they won't try to explain the flimsy documentation they are providing. They will move heaven and earth to sell him the investment du jour, but then they don't have the knowhow to report it properly - where have we heard that before? (Actually, I think they know exactly how to report it, but they contrive reports that hide the facts rather than reveal them. They certianly know how to produce very accurate reports for calucating their commissions & fees, don't they?)

After the 17th I will do whatever is needed to research this and bill him accordingly, but between now and the 17th, it ain't gonna happen. The client can then do whatever he wishes - maybe be will jack up the broker to provide usable info or maybe he will agree to pay me to do his research. Either way, it's off my desk and out of my head until I have time to work on it profitably and accurately.

But that's just me - maybe you have another solution.

[lovesledz]

Yes John, that is exactly the way I was leaning, but I figured I'd try the board first in the hope that maybe someone with more experience with this type of investment might know something that I don't. Thanks.