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I prepared to lend my mother money in anticipation of her buying a house. The money had been in an individual brokerage account in my name under my SSN; I transferred it to a new individual brokerage account in her name under her SSN. But I had full management authority of that account.

While the money was in her account I continued to actively manage it, accumulating significant short-term gains. Before the end of the year she decided not to buy a house and we transferred the money back into my brokerage account.

The broker must report capital gains (Form 1099-B) accumulated while the money was in my mother's account under my mother's SSN. How can the 1099s be reattributed to me when we file our individual tax returns?

Because of our relative tax situations this year it will be much more efficient if the gains can be attributed to me for tax purposes. (In fact, I imagine that an auditor examining the situation would argue that the titling of the funds under my mother's name should be disregarded for tax purposes because: no loan was actually made, I retained control over the funds, the transfer was reversed, and no real benefit accrued to my mother.)

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  • When you say you had "full management authority" over the account, does that mean you had power of attorney or something similar from your mother? Or did you just create the account with your mother's information and act for her?
    – Nosjack
    Commented Dec 1, 2020 at 20:28
  • @Nosjack – My mother signed standard forms instructing the broker to allow me to trade and transfer funds myself without her further involvement. It's called "authorized party" or something like that. It's a limited power of attorney, but not called that.
    – Lysander
    Commented Dec 1, 2020 at 20:40
  • Did actual shares get transfer from you to her, or were they cashed in and the money transferred? The same question on the second transfer.
    – mhoran_psprep
    Commented Dec 2, 2020 at 13:10
  • @mhoran_psprep All transfers in and out were in cash.
    – Lysander
    Commented Dec 2, 2020 at 21:15

1 Answer 1

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In this case your mother is considered a "nominee" of the actual owner of the property (you).

IRS covers this scenario in instructions for Form 8949:

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

Your mother would add the following to her 8949:

Enter code N in column (f)

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).

She would also file a Form 1099 for you with those adjustments – listing herself as the "payer" and you as the "recipient." You get a copy of that 1099, and she files that Form 1099 with the IRS using Form 1096.

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