Reporting return of principle

I hope I am not misreading the question. The proceeds of a stock sale is always the gross amount. If you buy a stock at $100 and sell for $100, you cannot ignore the transaction, you must report the full $100 sale and since you enter the cost of $100, the result is $0. The IRS matches up the gross proceeds, so that's what you must make sure you reconcile fully. You use the phrase 'return of principle' which really doesn't apply to stock transactions. Which is why I suspect I misunderstood. Joe

These transactions were for bonds and unit trusts, not stocks. They appear in the proceeds from broker, so I guess my instinct that they must be reported was accurate. I've done it that way before, and the only reason I was going down this path was because when I imported them into Turbotax, they all ended up in the Short Term gain category and it was confusing as to how to get them out of there. I've since found a worksheet for imported transactions that will do that, but it's still annoying. Wish purchase dates and cost values for simple transactions got captured so this didn't happen. You'd think the brokerages would be able to download this information since it shows up on their own records.

jo

"jo" wrote

You date the buy date and sell date accurately, and they appear as long - or short term as appropriate.

Not sure about the unit trusts but I would think it unusual for bond(s) to be sold for exactly it's purchase price. Not only does the instrument change in value due to both time and market conditions, there's also commissions and fees etc. (I assume) that will alter the net proceeds.

If I were working from a manually entered Schedule D in Turbo Tax, I would have known how to easily change it, in the manner you indicate. Instead, I imported my Sched transactions from my broker and Turbo Tax doesn'tmake it obvious how to get to the worksheet that is the source for the data that appears on Sched D. You can't right click on any transaction and be shown the option to go to the Imported transactions worksheet (new to me, altho I know I did this two years ago). I don't know how I found it, frankly... stumbled around a bit... but I've got everything fixed. The bottom line is that I couldn't edit them directly on the TT Schedule D, so had to do a lot of searching to find where I could do this editing.

jo

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Many muni bonds -- which are often combined into unit trusts -- have a callable feature after a particular time period (especially if they're marketed during a time of high yields). They are then invariably called

-- often at par -- as soon as that minimum period has ended, and a new issue at prevailing lower yields is then issued to replace the principal.

This frequently results in a return of principal -- with no gain involved. I watched shares of a municipal bond unit trust I bought in the mid-1980s, slowly disappear, as one issue after another reached its callable date during the early 90s. The entire trust -- comprised of "20-year _callable_ munis" had been dissolved by the mid-1990s ... or less than 10 years from when I bought the original issue.

Almost all transactions were recorded as "return of principal." Only in one or two instances (out of hundreds or bond issues) was there a premium paid for an early call -- which in those rare instances, was properly recorded as an LT gain.

I've also had individual munis (which were my original investments -- back in the days when Federal +State Income Taxes totaled more than 50%) called at par. In fact, every one I bought dissolved within 5 years (and why not, since they were doubly-exempt -- Fed and State -- and paying around 10%).

Bill