1099-S example involving multiple property owners
21 May 1099-S example involving multiple property owners
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1031 Exchange,
Capital Gain,
Capital Loss,
Passive Activity,
Paying Taxes,
Rental Real Estate,
Self Employ,
Small Business,
Sole Proprietor,
Tax Guidance & Preparation,
Taxable Income,
Uncertain Tax Position
by John R. Dundon II
Question: Tax payer produced Form 1099-S from the sale of property she owned jointly with her brother. The Form 1099-S had the full amount reported to her and the brother did not receive a Form 1099-S. What should be done?
Answer: The IRS explains in the General Instructions for Forms 1099, 1098, 3921, 3922, 5498, and W-2G that she is a nominee recipient because she received a Form 1099 for an amount that belongs to another person. The sister must file a Form 1099-S showing the amount allocable to the brother. This Form 1099-S will show her as the “payer†and the brother as the “recipient.†The sister must furnish Form 1099-S to the brother. Form 1096 is filed as well and the sister will be the “filer†for this form. A husband and wife are not required to file a nominee return to show amounts owned by the other.
For the purpose of matching the information return with the income originally reported to the taxpayer, the IRS only gives instruction for income reported on Forms 1099-INT and 1099-DIV. First, the taxpayer reports the full amount of the income reported to him or her. Then, the taxpayer offsets the amount properly reportable by someone else by entering that amount as a negative and labeling it “Nominee Distribution†on Schedule B.
It would seem that this method can be applied for other information returns and would be a good idea to report the full amount so the IRS does not send the taxpayer a notice of deficiency for the “missing†income.
