Many of my transactions on Ginnie Maes are returns on capital. My broker reports those to the IRS as capital gains. When I download treansactions from the broker's site into TurboTax they are put into Schedule D but have no purchase date or basis. Last couple of years I've edited these to add this info so that there's no gain (or loss), but there are sometimes a lot of these. Since the total has been reported to the IRS, I can't just delete these or not download. Any suggested solutions?
You'll still need to report those "sales" as the IRS computer was programmed to look at the total sales you report and the total sales reported by the broker dealers. Make them match. Keep the computer happy.
If these payments are truly return of invested capital, they cannot be paid out of operations and are usually reported in box 3 of Form 1099-DIV
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If they are capital gains distributions they would be in box 2a.
Someone explain to me how anything other than a liquidating distribution would be reported on someplace that software flows to a schedule D?
And if truly labeled as a liquidating distribution, most interim liquidating distributions would be handled as described in this thread, reducing basis until basis has been reduced to zero, thence as LT or possibly ST capital gains with zero basis.
GNMAs are securitized bundles of mortgages. As the mortgagees make their payments, part of the money collected is principal and part is interest. Additionally, if any of the securitized mortgages are paid off early, the principal collected is distributed to the GNMA holders. The payments received by a GNMA holder are not paid out of the profits earned by GNMA, the organization, so they aren't dividends nor returns of capital which are reported on 1099-DIV.
In theory, someone who purchases a GNMA security at issue and holds it until the last mortgage is paid off should realize $0 capital gain. Purchases/sales at other times will be made at market prices which will reflect the difference between the stated interest rate on the GNMA and current interest rates for debt securities of similar duration and risk.
As I said in my original post, that's why I have to somehow adjust these transactions. For several years I have made the cost equal the distribution and set the purchase date to the date of purchase of the bond. Is that cricket?
That's the way I've done it for a handful of clients. Technically, you are probably supposed to pro rate basis to these transactions and end up showing a gain or loss. But that could be a HUGE amount of work, resulting in very little gain/loss in any event. If you want a technical explanation, I suppose I would say I've "estimated" (under the so-called Cohan Rule) the amount of basis to be equal to the reported proceeds.
As I said in my original post, that's why I have to somehow adjust these transactions. For several years I have made the cost equal the distribution and set the purchase date to the date of purchase of the bond. Is that cricket?
That's the way I've done it for a handful of clients. Technically, you are probably supposed to pro rate basis to these transactions and end up showing a gain or loss. But that could be a HUGE amount of work, resulting in very little gain/loss in any event. If you want a technical explanation, I suppose I would say I've "estimated" (under the so-called Cohan Rule) the amount of basis to be equal to the reported proceeds.
----------- Actually a GNMA returns both principal and interest with each payment. So if you bought them at a discount from face value, there could be a percentage of the principal as a capital gain and the rest would be return of capital. Also you could have a loss on each payment if bought at a premium. For example: if you bought a $10000 GNMA for $9900, then if a principal payment of $ 100 was received, 1% or $1.00 would be capital gain. Then if you received a later principal amount of $ 150, you would have a $ 1.50 capital gain.
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