Deceased taxpayer and 1099 B Stock Proceeds

[tpnl]

Found answer, thanks anyway. I forgot DRAKE has a "nominee income" adjustment I can use on the data entry screens.

Original Post:
Taxpayer died August 2013 and in December 2013 mutual funds where transferred to heirs. The 1099 B was issued in the deceased taxpayers SSN. I know for INT and DIV income to show it on the final 1040 and then use a seperate line to subtract it back out labeled "1041 income" for income earned after the taxpayer expired. Do I do the same with 1099B income?

Now the tricky part. The stock was actually transferred to the heirs, it was not sold. It is listed on the 1099 B as "exchange" but it shows gains. So do I report the 1099 B the same way on the Form 1041 -- report the gross proceeds but show no taxable gain. Or am I even required to file a Form 1041 for this (there would be no other reason to file the Form 1041). I'm thinking the only thing the IRS "sees" is the proceeds, so I should explain the stock was transferred not really sold.

Any thoughts?

[Burke]

Original Post:

Now the tricky part. The stock was actually transferred to the heirs, it was not sold. It is listed on the 1099 B as "exchange" but it shows gains. So do I report the 1099 B the same way on the Form 1041 -- report the gross proceeds but show no taxable gain. Or am I even required to file a Form 1041 for this (there would be no other reason to file the Form 1041). I'm thinking the only thing the IRS "sees" is the proceeds, so I should explain the stock was transferred not really sold.
Any thoughts?

Stock transfers to the heirs not involving a sale are not reported on Form 1099-B. Are you sure there isn't some notation that "this information is not being reported to the IRS" on there? You do not file a 1041 for this, nor should it show up on anyone's 1040.

[tpnl]

Total Gross Proceeds are . . .

$1,525,321. And it does say gross proceeds ARE being reported to the IRS. Some of the sales during the year were made to pay for medical care, actually monthly withdrawals where being made through August. Then no withdrawals until 12-20-13 when the accounts were "exchanged." I'm being told the "exchanges" are the transactions where the stocks were transferred into the heirs names.

But the form clearly says the gross proceeds of $1,525,321 are being reported to the IRS. Maybe the form is wrong?

[Burke]

You betcha its wrong if it included the transfers to the heirs. My guess is they didn't "transfer" anything to them, they liquidated the funds and gave them the money. If they had transferred the funds into individual accounts with the heirs names and SSN's on them, there would be no "sale" or any "exchange" either. It is simply a transfer of ownership. And that is not reported on a 1099 to the IRS. I would contact the broker for an explanation.

[Burke]

PS: If you cannot resolve this reporting with the broker by getting a corrected 1099-B, and it is CLEAR the funds were simply transferred into accounts in the beneficiary's names, then report as usual on the deceased's/estate income tax return (however, the brokerage reported it) and show basis same as proceeds to zero it out.