help with Morgan Stanley tax statement

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montanagirl
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help with Morgan Stanley tax statement

Post by montanagirl » Mon Apr 02, 2018 8:18 am

A friend showed me his tax statement with the 1099-div, 1099-int and some capital gains on the first page. In the back were about a dozen sales of mutual funds, covered and covered, with different acquisition dates and even a lot of different sale dates. He says he just lets his advisor do whatever, trusts her completely, and did not take any withdrawals last year. It's not an IRA.

I am not familiar with these managed investment accounts. Does he need to report all those sales, or are these somehow "within" the account like within a mutual fund, and he need only report the summary info on page 1? I didn't get a chance to add up the proceeds to see if they equaled the cap gains number on page 1.

jebmke
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Re: help with Morgan Stanley tax statement

Post by jebmke » Mon Apr 02, 2018 8:20 am

I assume this is an account that is titled to the taxpayer and not a deferred account.

The 1099-B should detail all the transactions. One way or another (individually or at a summary level) they need to be reported on the tax return. Assuming no other capital gain transactions aside from this brokerage statement, you should be able to tied the sales value reported on Schedule D (via form 8949) with the total sales reported on the 1099-B.
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montanagirl
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Re: help with Morgan Stanley tax statement

Post by montanagirl » Mon Apr 02, 2018 8:33 am

jebmke wrote:
Mon Apr 02, 2018 8:20 am
I assume this is an account that is titled to the taxpayer and not a deferred account.

The 1099-B should detail all the transactions. One way or another (individually or at a summary level) they need to be reported on the tax return. Assuming no other capital gain transactions aside from this brokerage statement, you should be able to tied the sales value reported on Schedule D (via form 8949) with the total sales reported on the 1099-B.
[edit] Yes it's not deferred. All taxable. But the capital gains on page 1 were part of the 1099-div. (It looked like the 1099 you'd see for a single fund in taxable.) So I thought that might be something different from all the sales proceeds on pp 7-9. I'm not sure I even saw a 1099-b. But as a Boglehead I thought I saw a lot of useless churning going on, but didn't tell him that. Does it all go on Sch D or does 1099-div info take care of that? is what I should have asked.
Last edited by montanagirl on Mon Apr 02, 2018 8:57 am, edited 2 times in total.

pshonore
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Re: help with Morgan Stanley tax statement

Post by pshonore » Mon Apr 02, 2018 8:42 am

This cannot be a deferred account if he got what brokers call a consolidated 1099 which contain a 1099DIV, 1099INT and 1099B, Those all have to be reported to the tax software and should show up in the appropriate place - Form 1040, possibly Sched B for the interest and Sched D if there were actual sales.

jebmke
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Re: help with Morgan Stanley tax statement

Post by jebmke » Mon Apr 02, 2018 8:45 am

There should not be any 1099 for activity in a deferred account. If the capital gains are shown in Box 2 (a, b, c or d) of the 1099-Div the software will pick this up and report it on Schedule D.
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montanagirl
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Re: help with Morgan Stanley tax statement

Post by montanagirl » Mon Apr 02, 2018 8:56 am

Crap, I'm sorry, I left out the important word NOT..will fix...

jebmke
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Re: help with Morgan Stanley tax statement

Post by jebmke » Mon Apr 02, 2018 9:00 am

if these are assets held in the taxpayer's name, the sales transactions should be on a 1099-B; for a brokerage statement it will be part of the consolidated brokerage statement. Gains on these transactions would not be reported on the 1099-Div section.

for example, on my VG Brokerage statement front page there is a box that has "Summary of 2017 Proceeds from Broker and Barter Exchange Transactions." Later in the statement, there is a page called 1099-B which shows the individual transactions which are summarized on the front page.
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cas
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Re: help with Morgan Stanley tax statement

Post by cas » Mon Apr 02, 2018 9:07 am

montanagirl wrote:
Mon Apr 02, 2018 8:33 am
But the capital gains on page 1 were part of the 1099-div. (It looked like the 1099 you'd see for a single fund in taxable.) So I thought that might be something different from all the sales proceeds on pp 7-9. I'm not sure I even saw a 1099-b. But as a Boglehead I thought I saw a lot of useless churning going on, but didn't tell him that. Does it all go on Sch D or does 1099-div info take care of that? is what I should have asked.
It is really important to look to see if there is a 1099-B. In the "consolidated tax statement" examples I have seen from brokerages (not Morgan Stanley), the 1099-B has NOT been on the first page with the 1099-INT and 1099-DIV. It comes later in the package. (To make it more confusing, after the 1099-B, there are usually pages listing the "details" of the 1099-DIV and 1099-INT, e.g. all the separate dividend or interest or "capital gains distributions" payments.) What you are describing with all the individual sales sounds like a 1099-B to me, but I'm not looking at the page you are looking at (and have never seen a Morgan Stanley consolidated tax statement.)

The "capital gains" on a 1099-DIV are (technically, but "technically" matters with the IRS) NOT "capital gains" but instead "capital gains distributions" (which are a different income type than "capital gains.") The actual "capital gains" (if any) are reported on a 1099-B.

The "capital gains distributions" (1099-DIV) come from the managers of the mutual fund buying and selling the individual stocks held in the portfolio of an individual mutual fund. There is no such thing as "capital loss distributions".) (These sales are something that the owner of the shares of that mutual fund (your friend or his advisor ) have no control over.)

The "capital gains" (or "capital losses") (1099-B) result when the owner (your friend or his advisor) sell shares of a mutual fund (or individual stock or bond or whatever asset) for more/less than they were purchased.

"Capital gains distributions" (1099-DIV) are reported on a different line of Schedule D than are "capital gains/losses"). "Capital gains/losses" will also likely be first entered into a Form 8949, then flows through to the Schedule D. There will be different Forms 8949 for covered and noncovered sales. There are assorted rules explained in the instructions for Form 8949 on whether you report each individual sale or can consolidate them into a single line.

If your friend is using tax software, I would guess that the consolidated tax statement from Morgan Stanley brokerage could probably be electronically downloaded into the tax software. That would at least give him a start at having all the appropriate numbers go on all the appropriate forms. (Review then needed to make sure everything really is right, cost basis is correct, possibly designate dividends that were from municipal bonds or US Government obligations not subject to state tax, etc.)

If nothing else ... having to enter the 1099-B info should give your friend an understanding of how the advisor's trading is adding to his income and (maybe) tax bill.
Last edited by cas on Mon Apr 02, 2018 9:12 am, edited 2 times in total.

dbr
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Re: help with Morgan Stanley tax statement

Post by dbr » Mon Apr 02, 2018 9:11 am

Yes, download the 1099 into tax software and see what turns up populated on Schedules B and D and associated worksheets.

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BL
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Re: help with Morgan Stanley tax statement

Post by BL » Mon Apr 02, 2018 9:25 am

cas above seems to have covered the topic generally.

I haven't seen MS but the EJ 1099s were similarly many pages which makes most of us just give up rather than try to figure it out. Great for brokerage, not great for owner. Letting advisor run the show: Wow! Vanguard's is so simple by comparison.

Suggest he transfer to Vanguard, Fidelity, Schwab, etc. and just buy a target date fund made up of index funds. That is much cheaper, and tax would not be more than where he is now if he doesn't sell. (Probably a bit of tax to sell off what he has now, but better now than when it grows bigger in the future.)

Even better, learn the basics of investing from this 16-page free pdf:
https://www.etf.com/docs/IfYouCan.pdf
Three funds is all one needs to invest; no buy or sell recommended.

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montanagirl
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Re: help with Morgan Stanley tax statement

Post by montanagirl » Mon Apr 02, 2018 9:39 am

Great,thanks for the help.

Yes there was probably a 1099-B there, but the thing was so hard to read! The type is so small, and when you turn a page it's upside down etc. It looked like the FA was definitely churning the account.

But then I guess I have an attitude about Wealth Managers. :x

livesoft
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Re: help with Morgan Stanley tax statement

Post by livesoft » Mon Apr 02, 2018 9:44 am

This is not a big deal and happens all the time. If one reads the IRS instructions to Schedule D and Form 8949, then one can readily see that there are many different ways of putting the 1099 information into one's Form 1040. One can use short-cuts, but one can also put every transaction if they want to. The short-cuts are detailed in the IRS instructions.

One will always be in the dark about what's going on if one uses a tax preparer or tax software or bogleheads.org without reading the IRS instructions.
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RetiredAL
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Re: help with Morgan Stanley tax statement

Post by RetiredAL » Mon Apr 02, 2018 11:44 am

Montana...

As said by Livesoft, there are short cuts.

Any "Covered" transactions only needs to be entered as the 1 line summary for that category for that broker, NOT the many many lines of detail. The IRS only matches your total to the reported total. Since "Covered" reporting started 6 years ago, most of the transactions will likely be "Covered".

If any are "Not Covered", those need to be entered line by line.

btw: my daughter lives in White Sulphur Springs.

montanagirl
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Re: help with Morgan Stanley tax statement

Post by montanagirl » Mon Apr 02, 2018 5:52 pm

RetiredAL wrote:
Mon Apr 02, 2018 11:44 am
Montana...

As said by Livesoft, there are short cuts.

Any "Covered" transactions only needs to be entered as the 1 line summary for that category for that broker, NOT the many many lines of detail. The IRS only matches your total to the reported total. Since "Covered" reporting started 6 years ago, most of the transactions will likely be "Covered".

If any are "Not Covered", those need to be entered line by line.

btw: my daughter lives in White Sulphur Springs.
There was just one section on non covered. Lump together even if sell dates are different?

Not sure where White Sulphur Springs is, but I suspect it's beautiful. :sharebeer:

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BL
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Re: help with Morgan Stanley tax statement

Post by BL » Mon Apr 02, 2018 6:13 pm

Sometimes you can use "various" for dates on LTCG.

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Re: help with Morgan Stanley tax statement

Post by RetiredAL » Mon Apr 02, 2018 10:33 pm

Montana,

You can lump multiple entries of a single non-covered securities together as long as you separate LT vs ST while labeling the date as "various".

However, if there are multiple non-covered security, each must be listed. You cannot mix security A and B into a single lump.

For non-covered securities, the IRS receives from the Broker only what the net sale amount was for each security. You have to supply the cost basis on the tax return which the broker should show on the summary year-end statement.

Some people fudged the basis cost, so IRS changed the rules to have reported to them from the broker the cost basis along with the sale data, thus the cost basis became "covered". Most investments bought starting in 2012 are "covered".

Adjustments to the covered cost are allowed, but you better have your ducks in a row if you do so. An example would be the stepped-up cost basis with a decedent. Most Brokerage Houses will do the step-up for covered securities if requested.

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