Joint Account & Reporting Gains
Hello,
I have a client who established a JTWROS account with their son that they are both the account owners of. This account has now accumulated $400,000 of invested assets and my client is turning over the management decisions to their son yet retaining the JTWROS titling of the account. I had a meeting with the son and we would like to reallocate the portfolio based on his goals, timeframes and objectives now that he is actively involved in his financial decisions. I’m wondering, if we generate trades and realize gains to reallocate the portfolio, who is responsible for reporting these gains on their taxes? Previously, my client has always reported the 1099’s as part of their tax returns although the 1099 is generated under the son’s tax ID.
Thank you,
Todd
Permalink Submitted by Alan - IRA critic on Tue, 2021-03-30 02:49
If the SSN of record is that of the client, the client needs to report dividends and cap gains and use the nominee process to transfer the son’s share to the son. The respective shares are typically reflective of which JT contributed the funds. In a typical parent-child convenience account, the parent contributed 100% and would report all activity on parent’s return, but parent would also receive the 1099R. If the son has added funds or they develop an agreement under which the income is directed differently than the contributions, this would have to be reflected in the amounts under the nominee process that were reported on each’s tax return. While the IRS typpically does not question these arrangements as long as total income is reported, any incomplete tax returns could trigger IRS inquiries. I suggest they keep this arrangement as simple and consistent from year to year as possible.