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Here is the scenario I am faced.

I've transferred DSPP stock from my former employer's stock transfer company (Computershare) to Etrade a few weeks ago. These stocks are from 2010 and 2011.

I executed the sale of these stocks a couple days ago and learned that Etrade is labeling the gains of these stocks short-term and will be reporting to the government as such on the Form 1099-B. I have called Etrade and talked to a representative that told me this.

Basically said the burden of proof falls on me to provide documentation to the IRS that these stocks are indeed eligible for long-term gains.

My questions are the following:

  • Is the representative correct?
  • If so, what constitutes as proof and how can I include such proof in my 2014 filing? If it matters, I use Turbotax to do my taxes and e-file submit the docs.

As for proof, I have the following:

  • 2010 and 2011 Form 3922 for the stocks in question
  • A copy of Computershare's DRS Advice showing the transfer from the broker to Etrade
  • Computershare's transaction history where the DSPP Issuance is dated in 2011
  • Access to documentation of dividend payout as well, all the way back to 2012

Would this be enough to be considered as proof?

  • I would say that would be enough proof. That is weird to me that in the USA your broker reports that stuff to the Government. In Australia our broker does not label any stock at sale as long or short term to the government. The individual just enters the purchase and sales dates when they do their taxes. Our Tax Office then has the capabilities to check these dates if they chose to by cross referencing various databases. – Victor Sep 5 '14 at 6:05
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    I suspect this simply because, as your new broker, they don't have records of when you purchased those shares. I don't think they're being unreasonable; I think it's just a natural side-effect of changing brokers. – keshlam Sep 5 '14 at 14:40
  • Thanks for the responses. I do understand that this is a natural side-effect of changing brokers. What I am worried about is if the 1099-B will be incorrectly reported (cost basis and labeling of gains), and if so how I would be able to remedy the situation. – Viet Sep 5 '14 at 18:33
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The IRS provides guidance on how to fill out form 8949 if the 1099-B mis-categorized the type of gain.

If: You received a Form 1099-B (or substitute statement) and the type of gain or loss (short term or long term) shown in box 1c is incorrect

Then: Enter code "T" in column (f) AND Enter -0- in column (g). Report the gain or loss on the correct Part of Form 8949.

Source: http://apps.irs.gov/app/vita/content/globalmedia/teacher/how_to_complete_form_8949_4012.pdf

I suspect that Turbotax would make the suggested indications on Form 8949 but I would double check when you go to file.

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    Thank you Alex. This is the information I was looking for. Really appreciate it. – Viet Sep 5 '14 at 19:06

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