Nominee Distribution - Stock Sales

[FEDUKE404]

Client is involved with investment account where assets within the account (interest/dividends/stock sales) will be allocated to him via the "nominee distribution" route.

The scenario is H/W "own" the account, and by mutual agreement 2012 (and earlier years) a fixed per cent of all account income has annually gone to another family member (my client). This arrangement was in place for some time before the person was ever my client.

I am **NOT** handling the H/W tax work. That is their problem re completing any "nominee distributions" paperwork. All I have is a copy of the consolidated 2012 1099 packet.

For 2012 interest/dividends, data entry for income is simple: "XYZ Investments - Nominee Recipient" per IRS rules. Certain asset fees have also been shared.

But, what do I do with Schedule D?? The "original" account has Category A and B (Form 8949) stock sales.

The best I can come up with is to use Category C ("not reported to IRS") of Form 8949 for his portion of both the STCG and LTCG sales from the underlying account that DID involve "reported"/"unreported" cost basis to the IRS for both STCG and LTCG.

And dare I ask: Is it even possible to have a "nominee distribution" for a stock sale? ? ?

Thanks for all suggestions.

FE

[Gene V]

I'll make this short--busy right now--However, the answer is YES, under column "f' on form 8949 use code N

[FEDUKE404]

Form 8949 code

I'll make this short--busy right now--However, the answer is YES, under column "f' on form 8949 use code N

We're all busy these days...

I had seen Code "N" for column f of Form 8949.

However, client has not received any Forms 1099-B re this income. (As stated earlier....out of my/his control.)

Use it anyway ? ? ? ? ?

Procedure appears to be to enter the "original" (unreduced) numbers, i.e. cost/sale as reported to owners, and then back out the owners' share of the net to leave the clients share of the net. (And retain Code A or Code B as reported to the IRS originally.) Sounds awkward as all get out...but if that's what it takes.

Thanks.

FE

[Burke]

I am going to assume they have actually paid him his share of these "funds" he is paying taxes on. But the whole process is bordering on the illegal. You cannot shift income from one person to another to affect your tax liability either up or down, even by "mutual agreement." And then involve you to facilitate the process, which could be problematical. They should put his name on the account as a joint owner if that is what they wish to do.

[FEDUKE404]

More an allocation issue

I am going to assume they have actually paid him his share of these "funds" he is paying taxes on. But the whole process is bordering on the illegal. You cannot shift income from one person to another to affect your tax liability either up or down, even by "mutual agreement." And then involve you to facilitate the process, which could be problematical. They should put his name on the account as a joint owner if that is what they wish to do.

Account is for two parents (names on account) with their adult son, who has several other investment accounts in his own name.

I have no idea what level of income the parents have.

While it is awkward, and a royal PITA for me, I'm not sure it would rise to the level of "illegal" as both sides have been reporting their respective shares of income over the years. It's probably cheaper than setting up a trust or whatever. This is the first year when significant assets sales have occurred, so this account could have "a history" as to who put what funds in and when.

Oh yes, I have been informed the account was closed in early 2013.

FE