NUA/Long term &short term gain on sale/1099 gross proceeds
When I closed my 401k, I took my esop shares in the company as “as like kind” shares to take advantage of the NUA provisions of the tax laws. I sold the shares a few months after receiving them. As a result, as I understand it, I have a long term gain (the difference between the cost basis of the shares and the price of the shares when they were transferred to me out of my 401k) and a short term gain in the same sold shares (the difference between the price of the shares when they were transferred to me and the the price of the stock when I sold them). As you would expect, the brokerage firm that I sold the shares through only sent out one 1099 which reflects the sale of the shares. Since the firm didn’t know about the different cost basis, its left for me to enter the cost information on my return. To do that however, I need to enter each of the transactions which requires me to enter the gross proceeds of each transaction which causes me to have a larger gross proceeds number than was reported on my 1099. Any suggestions on how to handle? Should I just send an explanation letter to the IRS along with my return?
Permalink Submitted by Alan - IRA critic on Fri, 2014-02-21 23:25
I cannot locate any IRS instructions specifically for reporting NUA share sales. I guess that means improvising. What box does the 1099 B assign the sale to? If a cost basis is shown, I assume it is the incorrect figure of the value of the share upon distribution.
Permalink Submitted by richard Berman on Sat, 2014-02-22 01:46
There is no cost basis shown on the 1099. I have inserted on my return the proper cost basis. Unfortunately, when I enter both the long term sale (with an “artificial” sale date which is the date I received the shares) and the final transaction which is the date I actually sold the shares (including the short term gain), I have to put down gross proceeds for both transactions. Since the long term gain was not a part of an actual sale by the brokerage house, they only report the gross proceeds for the “actual” transaction. The result is that I end up reporting “gross proceeds” larger than the brokerage house is reporting.
Permalink Submitted by Alan - IRA critic on Sat, 2014-02-22 04:54
Your sale date should be the date you sold the shares. The acquisition date is the date of the lump sum distribution. If you want to make the total proceeds add up, this will work. You know the cost basis per share and the NUA per share already. Report in the LT section of Form 8949 or Sch D as if you sold the shares for the same value as they were initially distributed. Then in the ST section show you sold the same number of shares for the amount of ST gain per share with 0 basis. Example: Assume your NUA shares have a cost basis of 30/share, an NUA of 50 per share and a date of sale value of 90 per share. LT section indicate that you sold the LT shares at 80/share with cost basis of 30. LT gain is 50/share. Then in the ST section show you sold the shares at 10/share with 0 basis and that will produce a ST gain of 10/share. Total proceeds will equal the 1099B.