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Dorothy Rosen -- The Dollar Diva Ask the Dollar Diva

How do I report the proceeds from the sale of stock?

Dear Dollar Diva,
I sold some stock this year. When reporting the information from a Form 1099-B on my tax return, should I report the same gross proceeds that is stated on the form?

Yes. When you sell a stock, the sales price you report on Schedule D, Capital Gains and Losses, should be the same as the amount reported on your 1099-B. The IRS matches the amounts the financial institutions report with the amounts you report, and you can expect to get a notice if the amounts don't agree.

What if the amount you received is less than the amount reported on the 1099-B?

Financial institutions have two ways of reporting the sales proceeds on Form 1099-B:

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1. Gross proceeds: If the amount reported on the 1099-B is more than you actually put in your pocket, the financial institution reported the gross proceeds before the commission to the IRS. If that happens, add the commission to the price you paid for the stock when you report it on your Schedule D.

2. Net proceeds: If the proceeds reported on the 1099-B are the same as the amount you received, it means the financial institution is reporting the net proceeds after commissions. Since the commission is already deducted, you would not add it to the price you paid for the security.

What if the amount reported on the 1099-B represents a return of your original investment, and no capital gains or losses are involved?

You shouldn't get a 1099-B for a return of your original investment, but it happens. When it does, the IRS expects to find a matching entry on your tax return.

Report the amount stated on the 1099-B in two places: first as the sales price, then as the cost. The net will be zero, so there will be no tax consequence, and the IRS will be happy because it was able to match the amount on the 1099-B to the same amount reported on your tax return.

For more information on reporting 1099-B, see the IRS Instructions for Schedule D, Capital Gains and Losses.

-- Posted: March 26, 2001

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See Also
IRS Instructions for Schedule D, Capital Gains and Losses
IRS tax forms
Financial advice glossary
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