Can I split interest from proceeds on 1099-B?
Posted: Tue Feb 26, 2019 11:11 pm
My company was sold and stock we received cash for shares. A certain percentage of the payment for the shares was set aside in an escrow account for an amount of time, after which it was released to us. During this time, some interest was earned in the escrow account, which was included in the money released at the end. I received a 1099-B which has a "proceeds" amount equal to the amount released to us, including interest. I did not receive a 1099-INT. It seems that this is normal as this article says:
So for a hypothetical example, suppose $10,000 of the stock sale was placed into escrow, and it earned $100 of interest, and $10,100 was distributed to me from the escrow account, and they gave me a 1099-B with "proceeds" of $10,100. Is it correct if I include $100 on my Form 1040 line 2b (taxable interest), and $10,000 as proceeds on Form 8949 and Form 1040 Schedule D? If so, I am afraid that IRS will flag it for audit because they get a 1099-B with $10,100 but see only $10,000 on my Form 8949 / Form 1040 Schedule D.But while IRC §483 and associated regulations require escrow recipients to impute and report a part of any installment proceeds received as interest, there is no requirement for buyers to calculate imputed interest or file any interest information reports to the IRS. In fact, the need to report imputed interest on funds held in escrow as security, or to guarantee performance, is specifically exempted under 26 CFR 1.6049. Nonetheless, payment administrators typically provide escrow recipients form 1099-B, which includes the full amount of the escrow release.