Case Study 1: Carryover Losses
Taxpayers Jeremy and Janice Smith checked the "Yes" box for income from the sale of stock on the intake and interview sheet. The volunteer asks for details.
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Jeremy Responds |
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| Previously we discussed your dividends from the Pembroke Fund, reported on Form 1099-DIV. Did you have any other income from the sale of stock, securities, or other investments? |
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Yes, I sold some stock this year. |
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| Do you have a Form 1099 for that? |
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Yes, I have this Form 1099-B and this stockbroker's statement. |
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| We already discussed the capital gain distribution from the mutual fund when we entered the dividends. We'll examine the stock sale information now. I see the broker's statement has the sale details I need, but do you know when you purchased the Purdue stock? |
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I bought the Purdue stock back on July 13, 2000. |
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| I see the sale date was March 10, 2021. That means the holding period for the stock was more than one year. They call that long-term and it determines both where the information is reported and the tax rate for any gain. Now, do you know the basis for the stock? |
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What is that? |
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| That's what it cost you, including any broker fees or commissions. |
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Yes, it cost $10,053, plus I had to pay $35 in fees. |
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| Have you had any other costs, stock dividends, or stock splits related to the stock since then, such as additional fees? |
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No, that's it. Wait, when I sold it, I had to pay $35 more. |
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| That means that the basis for the stock is $10,088. The Form 1099-B shows that you received net proceeds of $8,859 when you sold the stock so the $35 you paid on the sale is already taken into account. We'll put all these numbers in the tax software. After I enter these other transactions from the broker's statement, we'll get a final net gain or loss on Form 8949 and Schedule D. This will determine the amount that will be reported on Form 1040. |
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| Indicate Jeremy's responses to these questions on the intake and interview sheet. |
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