Accepted Answer

Hello again Ladycat,

The purpose of the 1099B form is to report the amount of money that you received when you sold the stock.

When you report the sale of the stock on Schedule D, you should be using the sale price as reported on the form 1099-B and then it is up to you to show your cost basis in the stock and determine whether or not you had a gain or a loss. It is then the gain or loss only that transfers over to the form 1040, not the entire amount on the 1099-B form.

You do not owe tax on the amount reported on the 1099-B form.

Here is an example. Let's say you bought 50 shares of a stock 5 years ago for $10 per share, costing you a total of $500. Now suppose you sell those stocks for $12 a share for a total of $600. The investment firm is going to send you a 1099-B form which shows you received $600, but you do not owe tax on that amount. The only thing you owe tax on is any gain you had, or in this case $100. So on Schedule D you would show the sales price of the stock as $600 as reported on the 1099-B, and then you would show your cost as $500, and the gain of $100 is what then transfers over to your Form 1040 on line 13.

Using the same example as above, suppose you bought the stocks for $500 but then only sold them for $400. The 1099-B form you receive reports your $400 proceeds. On Schedule D you then show your selling price as $400 and your cost as $500, for a loss of $100. That loss of $100 then transfers over to line 13 of the form 1040.

You only pay tax on your gain or you only take credit for your loss. The entire amount reported on the 1099-B is irrelevant, and is only used to report your selling price. That amount does not go anywhere directly on to your Form 1040.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you Ladycat.

Expert:	Merlo
Pos. Feedback:	99.9 %
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Answered:	4/9/2009

Accountant

25+ years tax consulting. Specializing in returns for US citizens living abroad