1099-b and deceased taxpayer

[patavid]

Client and his brother were joint tenants in a taxable brokerage account. Client died on Oct 15, 2012 and received 1099-B showing multilple sales within the account after his death. The deceased client's SSN was used to report the entire year's transactions. It is my understanding the any transactions after the client's death should not be reported by the client but are the responsibility of the brother since he became the sole owner of the account on Oct 15 2012. If this is correct, how do I proceed form here? Does the brokerage firm need to send an corrected 1099-B to each of the tenants or can I simply do the client's 2012 return and attach a letter of explanation to the IRS ? The brokerage firm was not notified of the clients death in 2012. The client had no other assets other than the joint account at the time of his death.

Thanks in advance for your help

Patavid

[Kram BergGold]

What I would do

I would show the 1099-B amount on the return. Then I would adjust the basis with a note for each item sold after the date of death.
So let's say there was a $5,000 sale after the date of death I would adjust the basis to $5,000 to zero out the gain or loss. This way the amount the IRS is looking for in terms of gross proceeds is reported and the gains or losses are correct for you deceased client. You should also be doing basis adjustments for the sales before death to reflect the 1/2 ownership. It is my understanding that the income from a joint brokerage account has to be reported by each owner.

[Burke]

Don't worry about getting a corrected 1099. It'll never happen. Just report it the way it should be. If you get a CP2000 later for the deceased, a letter of explanation will suffice.

[mactoolsix]

Don't worry about getting a corrected 1099. It'll never happen. Just report it the way it should be. If you get a CP2000 later for the deceased, a letter of explanation will suffice.

We had this very thing happen last year - Several hundred items on a 1099-B. One owner passed mid-year. We contacted the broker (I think it was Schwab) and they provided a 1099-B showing the basis on the DOD and year end. Might be worth a phone call.

[JON]

Old old case

You will report only sales up to the date of death on the schedule D. You may wish to record the balance of gross proceeds at a 0 gain to match the 1099B. More troubling is the joint account. I believe 20 years ago there was a case where the Mom put the daughter as joint on the brokerage account and IRS said it was a gift. Mom had reported everything on her 1040s so there was no downside on the previous income tax reporting, BUT daughter was gifted and there was no step up on date of death. 20 years ago was that was a big deal, because brokerage accounts could have some substantial long term gains in them. Today who knows...