Capital Gains and Losses

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Capital Gains and Losses

My parents have a joint brokerage account. They are wanting…

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My parents have a joint...
My parents have a joint brokerage account. They are wanting to include me into the account, Is it possible for them to include me into the account? If so, would the realized loss I acquired from 2016 qualify as a deduction for short term capital gains acquired from the time I became a member of my parents joint account?
Submitted: 1 month ago.Category: Capital Gains and Losses
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1/5/2018
Tax Expert: levr, Tax Advisor replied 1 month ago
levr
levr, Tax Advisor
Category: Capital Gains and Losses
Satisfied Customers: 31,221
Experience: Working for a large tax preparation service
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We need to be clear - who owns teh money in this account and who owns shares which are sold at loss.

If that are your parents who own these assets - that will be their loss,

But if you and your parent combine funds - that is investment club - and all gain or loses are divided in the same proportion as contributed capital.

It is possible that parents will gift you some stock or the money to invest - if you do not have your own capital.

On your individual tax return you will combine your loss and your gain and your share of loss or a gain from that investment club.

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Customer reply replied 1 month ago
My parents contributed about 76% of the money in the account.
The realized loss I acquired in 2016 was about $150K. If I am a member of this joint account I can cary forward these losses to offset ordinary income, correct? Lets say the account has made $70,000 in capital gains in 2018 and I am a member of it. Is it possible to be assigned all of the short term capital gain so that the loss can be carried forward like so: 70,000 - 150,000 = -80,000?
Tax Expert: levr, Tax Advisor replied 1 month ago

You will need to report YOUR share of the gain or loss on that joint account.

If your parents contributed 76% and you contributed 24% - you will be use 24% of that realized gain - and it will be transferred to your individual tax return.

You will use ALL capital losses carried forward from previous tax year and will be able to offset all capital gains plus additional $3000 will be used to reduce other taxable income.

The rest will be carried forward to the following year and so on until fully used.

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Customer reply replied 1 month ago
Is there a way to transfer all gains from the joint account to me? I have heard that a 1099-div could do this?
Tax Expert: levr, Tax Advisor replied 1 month ago

Yes - that is possible.
However - in order to do that - that woudl NOT be a joint account - and parents will gift all assets from that account to you.

Then all the gain on assets OWNED by you will be yours.

In the current situation - you want that your parent will reassign their income to you - and that is not allowed.

The "assignment of income" doctrine states that income is taxed to the one who earns it -- a taxpayer cannot avoid tax by assigning his income to another party or entity.

Gross income derived from property must be included in the income of the person who beneficially owns it.

Thus - if shares are owned by you - income realized from the sale of these shares should be included into YOUR gross income.

But when shares are owned by your parents - that is their income.

So if you want to have all the gain to be included into YOUR income - you must be the ONLY owner of shares which produce such income.

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Tax Expert: levr, Tax Advisor replied 1 month ago

I appreciate if you take a moment to rate the answer.

Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you with all Social Security / Tax related issues.
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