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1099-DV, 1099-B

I established a UGMA mutual fund for my son many years ago. We have used it to pay school expenses, and I have clearly treated it incorrectly on prior tax returns in that I have claimed the income. I now understand the proceeds of the stock redemption in 2007 should go on my son's tax return. Total income with the stock redemption proceeds will total $5975.44, so tax consequences are not relevant. I just want to put things where they belong on the tax return.

I have two 1099-DIVs and one 1099-B from the mutual fund company. I get where the 1099-DV amounts should go on the 1040. Its the 1099-B that is confusing me. Box 2 is $3500, the gross proceeds. On the back of the 1099-B it tells me that this amount goes on Schedule D. So I should just slap the $3500 in item F?

Thanks

Reply to
FreddieFarkle
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[Original poster asks about tax treatment of income from an UGMA]

Assuming they total to less than $1500, the DIVIDENDS reported on them go to the "Dividends" line of 1040 (9a, I believe) and the QUALIFIED DIVIDENDS reported on them go to the "Qualified Dividends" line of 1040 (9b, I believe). If the 1099-DIV also reports any capital gain distributions, those will go on the "Capital Gain Distributions" line in the long-term section of Schedule D.

Intentionally oversimplifying, the $3500 goes in the "Proceeds" column of Sched D, what was paid for the fund goes in the "Basis" column of Sched D, and Proceeds minus Basis gives you the gain (or loss) on the sale.

However, it's a bit more complicated than that. You need to figure out how many shares of the fund (if any) were purchased less than one year before the sale. Yes, you bought the fund many years ago, but if distributions have been reinvested, then you'll likely have some shares held less than a year. You'll need to allocate the proceeds and basis proportionally between shares held less than a year and shares held more than a year and report them in the short-term and long-term sections of Sched D respectively.

-- Rich Carreiro snipped-for-privacy@rlcarr.com

Reply to
Rich Carreiro

Make sure one of those isn't a corrected version of the other.

That's where you start. You have to provide the basis and holding period information. See the Schedule D instructions and IRS Publication 564.

Reply to
Phil Marti

Not sure what you mean by "not relevant". As the other replies indicated, you need to determine what the gain (or loss) is on the $3500 stock sale.

But the other $2500, even if the stock gain is zero, sounds like investment income which is not only taxable for your son, but amounts over $1700 are subject to "kiddie tax" and taxed at your rate, assuming he is your dependent and has no earned income.

-Mark Bole

Reply to
Mark Bole

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