Ptc and dependent's income

[peggysioux]

Taxpayer's daughter is required to file a tax return due to taxpayer's day trading of financial account of daughter. Form 1099 composite shows proceeds of $37,809, however she has a net income loss of ($624). Taxpayer's daughter also receives SS benefits due to loss of mother. My question: Being daughter has to file a return even though net loss of income, does the social security income need to be included in calculation of premium tax credit. I found the following information on IRS website:

"A household’s MAGI is the sum of the MAGI of the taxpayer, the spouse filing jointly, and dependents who are required to file a return. Dependents who have income above a certain amount ($6,200 in earned income and $1,000 in unearned income in 2015)[/B] must file their own tax return even though someone else claims them as a dependent. (Social Security benefits do not count toward these thresholds.) If the dependent with Social Security benefits is not required to file a return, any Social Security benefits he or she receives are not counted."

Daughter does not have either $6200 in earned income or $1000 in unearned income, but she is required to file a return due to stock proceeds.

I would appreciate some expert advice on this issue.

Much appreciated.

Peggy Sioux

[New York Enrolled Agent]

Taxpayer's daughter is required to file a tax return due to taxpayer's day trading of financial account of daughter. Form 1099 composite shows proceeds of $37,809, however she has a net income loss of ($624). ...

My question: Being daughter has to file a return even though net loss of income, does the social security income need to be included in calculation of premium tax credit. I found the following information on IRS website:


Daughter does not have either $6200 in earned income or $1000 in unearned income, but she is required to file a return due to stock proceeds.

According to IRC §61(a)(3) gross income includes gains from dealings in property. Gross proceeds by themselves do not trigger the requirement to file a return - gross income does. See IRS SCA 200018051

[peggysioux]

PTC and Dependent's Income

According to IRC §61(a)(3) gross income includes gains from dealings in property. Gross proceeds by themselves do not trigger the requirement to file a return - gross income does. See IRS SCA 200018051

It is late and my brain is slow this evening, so could you help me better understand the above. Being 1099 Composite was filed showing stock proceeds of $37,809, isn't a tax return required or how would the IRS know how much of the proceeds are taxable? So I guess my question is are the $37,809 of gross proceeds considered gross income by the IRS even if overall unearned income is under $1,000.

My biggest question is: are the daughter's social security benefits included in household income for the computation of the PTC being dependent had gross proceeds of $37,809, but did not have earned income over $6200 or unearned income over $1000.

Thank you for your input.

Peggy Sioux

[TaxGuyBill]

No, don't include the Social Security income.


Although it's easiest to say "required to file a tax return", that's not really how the law reads. To put it simply, is there "taxable income" on Line 43 of the dependent's 1040? If so, include the MAGI of the dependent (including Social Security). If not, don't include the dependent's income at all.


If you want the legal gibberish, it reads as "were required to file a return of tax imposed by section 1 for the taxable year". "Section 1" imposes the income tax on "taxable income" (Line 43 of the 1040). If there is not "taxable income", it does not apply.

[Burke]

According to IRC §61(a)(3) gross income includes gains from dealings in property. Gross proceeds by themselves do not trigger the requirement to file a return - gross income does. See IRS SCA 200018051

True, but with $37,809 being reported to the IRS, they will be looking for a return as surely that exceeds the reporting threshold. It's up to the TP to prove a loss.

[kathyc2]

True, but with $37,809 being reported to the IRS, they will be looking for a return as surely that exceeds the reporting threshold. It's up to the TP to prove a loss.

This has been true in the past, but is it still true if basis is reported to IRS?

[ttbtaxes]

The OP said it was day trading which means the 1099-B should show a Catgeory A with basis reported to the IRS. I suspect their computers would not generate a letter. My answer changes if any of the trades has a "no basis reported to IRS" designation.