Question

Question about splitting Capital Gains/Losses

Forum|Forum|4 years ago
March 22, 2022
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I am doing the tax return for some friends. They are both filing with status of Married Filing Separately. They share a joint account with a financial institution. There are some earned dividends as well as a long term capital loss. Do they just split these figures equally for their individual returns? Example if there was $200 in earned dividends and $1000 capital loss, does each person report dividends of $100 and a capital loss of $500? If it makes a difference, they are in Illinois. Thanks for any assistance with this matter!

ColeenD3

Yes, assuming that they are both joint account owners, they would just split everything 50/50.

B

behnkebobAuthor

Quick followup question. How will the IRS reconcile that the total amounts (the ones in the Original financial statment from the brokerage) are not the same as in either individual return? Will this trigger an audit?

ColeenD3

No, if both of your names and social security numbers are associated with the account, you are fine.

If it belongs to only one of you, you would have to nominee the other person's income to them.

Nominee returns.

Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received). You must also furnish a Form 1099 to each of the other owners.

File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area (provided on the Form 1096).

On each new Form 1099, list yourself as the payer and the other owner, as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer. The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.