Nominee income

[DTS]

I have a client that is going to issue a 1099-DIV for nominee dividends to his mother. This account has the dividends, QD, cap gains distribution, foreign tax paid, etc, etc.

If he does this, can he assign only the dividends and QD and keep the rest or does he have to give all this reported information to the mother like the brokerage did him?

Seems to me like it would be to his advantage to assign it all to her with the exception of the foreign tax paid???

Thank you,
Dennis

[JG EA]

What the instructions say:

If he does this, can he assign only the dividends and QD and keep the rest or does he have to give all this reported information to the mother like the brokerage did him?

Thank you,
Dennis

Pub 550: "Nominees. If you received ordinary dividends as a nominee (that is, the dividends are in your name but actually belong to someone else), include them on line 5 of Schedule 1 (Form 1040A) or Schedule B (Form 1040). Several lines above line 6, put a subtotal of all dividend income listed on line 5. Below this subtotal, enter “Nominee Distribution” and show the amount received as a nominee. Subtract the total of your nominee distributions from the subtotal. Enter the result on line 6.

File Form 1099-DIV with the IRS. If you received dividends as a nominee in 2006, you must file a Form 1099-DIV for those dividends with the IRS. Send the Form 1099-DIV with a Form 1096, Annual Summary and Transmittal of U.S. Information Returns, to your Internal Revenue Service Center by February 28, 2007 (April 2, 2007, if you file form 1099-DIV electronically). Give the actual owner of the dividends Copy B of the Form 1099-DIV by January 31, 2007. On Form 1099-DIV, you should be listed as the “Payer.” The other owner should be listed as the “Recipient.” You do not, however, have to file a Form 1099-DIV to show payments for your spouse. For more information about the reporting requirements and the penalties for failure to file (or furnish) certain information returns, see the General Instructions for Forms 1099, 1098, 5498, and W-2G."

So as long as they actually belong to someone else you apparently can nominee whatever it is. But, I doesn't sound like to me you can do it just to avoid taxes.

[DTS]

Nominee

JG,

Several of my client's accounts were in his Mother's name until he started to manage them for her then the ss# changed on the accounts, but this is still her money. So, I see no problem proving this in the future, if needed.

Thank you for the post. I appreciate it!
Dennis