Sch D sales of stock between JT TENs

[Possi]

How do I handle this Sch D sale of stocks with a net gain of over $186k between ex husband and ex wife? 

His is the primary tax ID number on the account. 

They are listed as JT TEN on the statement. 

Am I able to split the "hit" on all this income? Right now, he owes over $72K to the feds and over $13k to the state. 

It's a new client (last year) and I'm already shaking over what will happen when he finds out. 

Am I able to use half as "nominee" income and take it off? If so, how is that accomplished?

[jklcpa]

How about reporting wife's share of gain as a negative adjustment on Form 8949 with code N. This is from the 8949 instructions for code N:

Quote

You received a Form 1099-B or 1099-S (or substitute statement) as a nominee for the actual owner of the property.

Report the transaction on Form 8949 as you would if you were the actual owner, but also enter any resulting gain as a negative adjustment (in parentheses) in column (g) or any resulting loss as a positive adjustment in column (g). As a result of this adjustment, the amount in column (h) should be zero. However, if you received capital gain distributions as a nominee, report them instead, as described under Capital Gain Distributions in the Instructions for Schedule D (Form 1040).

 

If you don't like that code, there's code "O" for any adjustments that don't fit any other codes listed, and you provide an explanation.

Are you preparing the wife's return too?

[Margaret CPA in OH]

Just curious - were they still married at end of year so all gain is 50-50? Or was the title on the statement not changed or is the account still joint?  If they were still legally married, is it better bottom line for them to file joint?  Sometimes the dollars involved can be persuasive, sometimes not. 

With the example Judy showed, does that mean that each of them report the full gain and wife nominees out half?  What does the ex husband report?  If he reports the full amount, too, does he nominee out half? 

[jklcpa]

I am curious if this was a blunder to cash out wife's half in settlement of their assets due to divorce that could have been easily handled with a QDRO that would have avoided this headache and saved tax dollars too!

[Abby Normal]

Were the stocks sold before the divorce was final?

Good luck getting the ex to report her share.

Did the ex get any of the proceeds?

[Possi]

8 minutes ago, Abby Normal said:

Were the stocks sold before the divorce was final?

Good luck getting the ex to report her share.

Did the ex get any of the proceeds?

They were divorced. 

I just spoke to him. He took all the money and put it on a house. He knew he'd pay tax, but was blown away at the amount. I didn't even mention the ex because HE didn't mention her. So, he's taking the hit. 

"What do I do, I don't have $85k...." 

I would suggest you borrow it from anybody but the IRS. 

You can't fix stupid. But boy, the anticipation of telling him this and wondering if he was going to try to dish half off had my stomach hurting. 

Oh wait, I didn't eat... that's what had my stomach hurting.... 

INAD (I need a drink)

[Abby Normal]

With that amount of federal tax, it must have been all short term? 72/186 = 38.7%.

But a 'bomb' like this on a return can cause a lot of other things to go away, too.

[Abby Normal]

16 minutes ago, Possi said:

I would suggest you borrow it from anybody but the IRS. 

Actually, I usually recommend "borrowing" it from the IRS both for lower interest rates and it doesn't show as a debt on his credit report.

[Possi]

7 hours ago, Abby Normal said:

Actually, I usually recommend "borrowing" it from the IRS both for lower interest rates and it doesn't show as a debt on his credit report.

I never thought of that. I just think of the IRS as the "worst lending institution in America." 

 

[Lion EA]

Their "lending" is very businesslike and at low interest rates. Now, CT has high rates, a flat fee, and paperwork that borders on tell us what you own, sell it, and give us all your cash.

[Abby Normal]

Yeah, MD was always a flat 13% but they've been lowering it gradually over the past few years. Not sure how low it's actually going, but it's still too high.