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Author: mathetes Big red star, 1000 posts Old School Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121572  
Subject: Wells Fargo 1099 & Wash Sale Date: 5/17/2012 8:31 AM
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I'm curious: did anybody else out there got a Form 1099 from Wells Fargo, more specifically the Wells Fargo Advisors unit, for the tax year 2011 that mis-reported a wash sale?

My father-in-law, 91 years old, asked me to do his taxes for last year (I use Turbo Tax, he'd gotten tired of paying a CPA for essentially data entry, I was free :-)). In December of 2010 he'd sold some stock at a loss; then, inadvertently re-purchased it in January of 2011 too early, thus incurring a wash sale, complicated slightly by the fact that it spanned calendar/tax years.

We noticed as we collected the information that Wells Fargo Advisors had correctly accounted for the wash sale carry forward when he ultimately sold the Jan purchased stock in December of 2011. That is, they correctly accounted for it in the December activity statement, adjusting the basis and holding period to reflect the older stock that had been sold in December of 2010. But--here's the mystery--their Form 1099, issued in January, dealt with it solely as a short term cap gains transaction.

After we inquired, a representative of an organization called First Clearing, LLC--which, it turns out, prepares these statements for Wells Fargo--wrote a fuzzy (evasive) letter cleverly worded to agree that "the closed lots do not appear to have taken into consideration the wash sale loss carry over" and going on to justify it on the basis that they weren't required to start adjusting basis on wash sales until January 1 of 2011.

But they didn't offer to issue a corrected Form 1099, which seems strange to me.

[Note: we've written back asking for a less equivocal acknowledgement that the 1099 is wrong, in the event of an audit triggered by our having filed the Schedule D with correct info and their having submitted to the IRS an incorrect report.]

So: any experience from others? I'd always assumed that Forms 1099 are prepared by people (OK, computers, but computers that have been programmed by people) who know what they're doing and are committed to accuracy. Is First Clearing, LLC, behind other financial services firms as well, issuing other incorrect 1099s?
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