Form 1099-B & 8949 Input Question

[rfk]

Hello all,

A question about Form 1099-B and "gross proceeds," line 2. I have about five trades that have a negative amount - single digit - for gross proceeds. Looks like a "trade cost" and my client lost money on the trades. However, one of the trades has a single digit plus number though (???). I am just lost on the negative proceeds for the trade, which I know is a "cost" to the client, but only one positive value for proceeds. So overall question is what has been the experience of others in "inputting" negative numbers for line 2 in conjunction with the rest of the needed report information for 8949 and D?

Thanks.

rfk

[Gary2]

I don't have any first hand experience, but the instructions for the 1099-B explicitly allow for a negative sale price, so I would hope the IRS computers are capable of handling it.

[FEDUKE404]

Very strange

I don't recall ever seeing a negative number on a Form 1099-B, which generally reports gross proceeds from a stock transaction. (I'm not even sure my tax software would even accept a negative number as "sales proceeds" on a Form 1099-B!)

Such a scenario would basically say the "income" from the sale was..... an invoice???

Could this be either an option issue or a short sale, and someone is getting thoroughly confused over "gross" vs "net" ??

FE

[Gary2]

The example given in the 1099-B instructions is for the closing transaction of a forward contract. I don't know enough about how those are structured and reported to comment, but there's an easier example: If a brokerage normally reports the proceeds net of commissions (i.e., subtracts their commission from the proceeds), and if the proceeds are less than the commission, the result would be a net negative number.

[rfk]

My undesrtanding

Thanks, Gary,

My understanding was that it was a "transaction cost" net for the transaction. Client closed out positions and lost money. TD Ameritrade said that it was their cost for the client.

rfk

[FEDUKE404]

Flags to consider

Thanks, Gary,

My understanding was that it was a "transaction cost" net for the transaction. Client closed out positions and lost money. TD Ameritrade said that it was their cost for the client.

rfk

Now since I've seen Ameritrade mentioned.......

There's always a FIRST time (somewhat akin to I keep hoping to see an entry for fees PAID on a Form 1098-T) but every Form 1099-B I've ever encountered always shows gross proceeds and never net proceeds.

I have seen some weird reporting for stock options, where an employee exercises option/cashes out the underlying stock on the same day, and the Sch D eventually shows a small loss which loosely corresponds to the fees for the stock sale only. Then you have to do some dredging to see what did/did not show up on the W2 and/or Form 1099-B, along with the "real" ( = adjusted) cost basis.

As I mentioned earlier, if the client is dealing with puts/calls the "facts" can be a bit challenging to match with the tax documents. This is especially true if options are being traded against stocks already owned (which can result in a cost basis adjustment). For merely buying/selling a plain vanilla option, then the question becomes whether an offsetting purchase/sale of such was actually made, or instead the investor just "let the clock run down." I do not know if a firm, especially Ameritrade, might "charge" something for a put/call option that never was exercised but merely expired on the assigned date.

Bottom line: Be sure you have ALL available facts here before reaching a final conclusion! The fact that five separate trades exist with these unusual numbers showing might well merit some further review. As was mentioned previously, dealing with the information on Form 8949 might present a dilemma. I did try a negative "sale" amount and my tax software accepted it....but the issue of also reporting cost basis/purchase date(s) still loomed.

FE

[Gary2]

As I mentioned earlier, if the client is dealing with puts/calls the "facts" can be a bit challenging to match with the tax documents.

What tax documents? Brokerages aren't required to issue 1099-Bs for puts or calls, and I've never seen one - though they generally include the information in the transaction details that they provide along with the1099-B.

[FEDUKE404]

Options dispositions

What tax documents? Brokerages aren't required to issue 1099-Bs for puts or calls, and I've never seen one - though they generally include the information in the transaction details that they provide along with the1099-B.

So i was unaware that options (apparently) do not show up on a Form 1099-B. Time to take me out and shoot me, I guess......

I did stumble onto this nice summary of options treatment. Perhaps it will be of use to someone:


I'll try to summarize it--

1. If you sell an option and it expires without exercise, it is a capital gain in the year it expires (not necessarily when the proceeds were received) and is reported on Schedule D.

2. If you buy an option and it expires without exercise,it is a capital loss in the year it expires (not necessarily when it was purchased) and is reported on Schedule D.

3. If you sold a call and it is exercised, the option proceeds are added to the sale proceeds and the entire transaction is reported on Schedule D in the year of exercise.

4. If you sold a put and it is exercised, the option proceeds are subtracted from the basis of the stock.

5. If you bought a call and exercised it, the amount you paid for the call is added to the basis of the stock.

6. If you bought a put and exercised it, the amount you paid for the put is subtracted from the sales proceeds.

If all of that confuses you, take heart in knowing that you're not the only one.


This link to a discussion (early 2012) board also has some useful information, including how to report dispositions on Schedule D:

http://community.intuit.com/posts/puts-and-calls-2

The post by "peterhawaii" seems particularly well-written.

FE

[DonPriebe]

What tax documents? Brokerages aren't required to issue 1099-Bs for puts or calls, and I've never seen one - though they generally include the information in the transaction details that they provide along with the1099-B.

And this too shall change ... Mandatory reporting of option trades on 1099-Bs starts for options acquired on or after January 1, 2013.

[rfk]

Still Reviewing but...

I am still reviewing but the person at TD said that is was a cost (TD imposed). There is cost basis available (on my worksheet, not TD's), the positions were sold off, and the gross proceeds via the 1099-B showed these small, negative values for Line 2. One small positive value for a trade. Again I have the cost basis for all, TD did not.

Thanks again!

rfk