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As part managing my father's estate, a mutual fund was liquidated. The 1099 has the wrong date of death, and therefore the wrong cost basis. I don't see where on the 1041 Schedule D to handle an incorrect cost basis. Do I need to have the 1099 corrected, or can it be handled on the 1041 Schedule D?

Doesn't an inherited asset maintain the holding period? The 1099 reports the date of death as the acquistion date.

(Given everything that has happened in the last 18 months, it is possible that the mistake was mine. I am not certain, if they requested a copy of the death certificate.)
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And, how about a 1099-C with incorrect Fair Market Value shown on it? Is there a way to correct that in time to get taxes filed? It doesn't appear that the lender involved has any interest in getting the correction done before 4/15.
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A 1099 does not create a liability that wasn't there in the first place. Prepare the return using the right dates and numbers, then respond accordingly if the IRS inquires. It's always nice to get a corrected 1099 from the issuer, but it's not necessary, and I wouldn't waste more than a phone call trying.

If you're using Form 8949 pay careful attention to the form's instructions since there's a specific way of correcting 1099 information for an "A" transaction.

Phil
Rule Your Retirement Home Fool
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Doesn't an inherited asset maintain the holding period? The 1099 reports the date of death as the acquistion date.

The 1099 is correct. Perhaps you're confused in that the sale of an inherited asset is long-term regardless of how long the heir has owned it. You simply show the date acquired as "inherited."

Phil
Rule Your Retirement Home Fool
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The 1099 is correct. Perhaps you're confused in that the sale of an inherited asset is long-term regardless of how long the heir has owned it. You simply show the date acquired as "inherited."

Phil
Rule Your Retirement Home Fool


Thank you, I was not aware that inherited assets were always long-term.
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If you're using Form 8949 pay careful attention to the form's instructions since there's a specific way of correcting 1099 information for an "A" transaction.

Phil
Rule Your Retirement Home Fool


I have read the instructions for form 8949. It does require care, but doesn't look too difficult.

With an "A" transaction, it looks like columns a through e match the entry on Schedule D. Column f should be "B", which makes column g "0".



It is annoying that I am not able to convince the H&R Block software to display Form 8949. Since it will be a paper return, it is easy to work around that problem.
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It is annoying that I am not able to convince the H&R Block software to display Form 8949. Since it will be a paper return, it is easy to work around that problem.

I thought you were doing a 1041. According to the instructions I'm reading you don't use the 8949 for a 1041 Schedule D.

Phil
Rule Your Retirement Home Fool
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I thought you were doing a 1041. According to the instructions I'm reading you don't use the 8949 for a 1041 Schedule D.

Phil
Rule Your Retirement Home Fool


That would explain why it doesn't show it for the 1041.

I thought the 1099 had the tax basis based on the stated acquistion date. Verifying the cost basis, the 1099 is correct. They may have back dated the acquistion date to make it a long term transaction.

Now if I can just generate correct final K-1s. It maybe time to delete the return, and try again. Software can be helpful, but all it takes is one incorrect entry to generate really bad output.
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And, how about a 1099-C with incorrect Fair Market Value shown on it? Is there a way to correct that in time to get taxes filed? It doesn't appear that the lender involved has any interest in getting the correction done before 4/15.

Is the amount taxable? 1099-C reports possible taxable income. If this was a foreclosure or short sale of a primary residence, the amount might not be taxable under the Mortgage Forgiveness Debt Act or for other reasons.
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No, this is a short sale on a rental property. The only part that should be taxable is the forgiven part of the debt in block 1. The lendor, because of the short sale, didn't have to forgive the part of the debt that was covered by proceeds of the sale.
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The only part that should be taxable is the forgiven part of the debt in block 1.

That is the most that can be taxable. It could be less.

Were they insolvent - that is, was the total of their debts larger than the Fair Market Value of their assets (including both the FMV of the property sold and the full amount of the related mortgage)? If so, to the extent they were insolvent, the forgiven debt is not taxable.

There are a couple of other possibilities spelled out in IRC section 108. Another that comes to mind is the qualified real property exemption. That generally applies to real estate used in a business. And renting property is a business.

If some of the firgiven debt is not taxable, then you'll probably need to adjust the basis of the property when figuring the gain or loss on the sale.

This isn't a process for the feint of heart. It's complicated, and something on which even well-educated professionals have differing opinions.

--Peter
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