1099 B and custodian account

[Kea]

Client (age 35) got a CP2000 stating additional tax owed due to 1099B with $18,000 gross proceeds. This account was a custodial account her mom had set up for her years ago. Mom cashed out account in 2006 and received 1099-B at her address. She reported the sale, basis and profit on her account. 1099B had both names on it but showed daughter's SSN.

Do I just amend return and show gross proceeds in and then nominee it out on next line? 2nd line just has "Nominee to Mom Name, xxx-xx-xxxx" and then negative $18K? Do I need to issue a 1099B from daughter to mom?

Or, is there a better way to handle this?

Thanks so much.

[jainen]

>>She reported the sale, basis and profit on her account.<<

Using the normal appeal procedure as shown on the letter, submit a copy of the mother's return (with permission) proving that the sale was already reported by the income recipient. If that is not successful, you will need to amend both returns. That is not desirable because the daughter will owe two years of interest (presumably she can get the penalty waived by showing that the mother claiming the sale was reasonable cause for the daughter to not claim it).

[Kea]

Thanks so much!

[michaelmars]

if the daughter does wind up paying the interest the mom will receive a slightly lesser amount as interest income - sort of a wash.

[joanmcq]

If mom set up custodial account, didn't daughter own the account? How did mom cash daughter's account?

But aside from that, simply explaining two names were on the account should be enough...you should not have to get a copy of mom's return, just give the SSN it was reported under.

[Kea]

I don't know how Mom was able to get the money but she did. I do have a copy of Mom's Schedule D, but no the whole return.

My client is currently on vacation so we'll wrap this up when she gets back.

Thanks!