Reporting large private transaction to IRS?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
deanmoriarty
Posts: 290
Joined: Tue Jan 28, 2014 1:19 am

Reporting large private transaction to IRS?

Post by deanmoriarty » Mon Feb 11, 2019 12:07 pm

Hi,

In 2018, I sold some shares of a private illiquid company to a third party, for low 7 figures. The transaction was regulated by a proper contract written by lawyers, which clearly states which ones of my lots were sold, what was their cost basis, and what was the sale price.

The IRS doesn't know anything about this transaction, they only know my cost basis (since I acquired those via ISO exercise, I had to report it for AMT purposes on my tax returns a few years ago).

In TurboTax, I just followed the proper interview, and it seems to generate the right documentation (Schedule D, Capital Gain Worksheet, NIIT tax, form 8949 - Sales and Other dispositions of Capital assets, ...).

My question is: since the sale was not reported to the IRS by any brokerage firm (so there's no 1099-B essentially), should I send additional documentation to the IRS, such as a copy of the sales contract along with my return? Would that minimize the chances of me getting audited?

Thanks

AlohaJoe
Posts: 4846
Joined: Mon Nov 26, 2007 2:00 pm
Location: Saigon, Vietnam

Re: Reporting large private transaction to IRS?

Post by AlohaJoe » Mon Feb 11, 2019 12:10 pm

You should follow the clearly laid out IRS instructions on what they want you to send them with your taxes. Don't send them things they didn't ask for.

Grt2bOutdoors
Posts: 21369
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Reporting large private transaction to IRS?

Post by Grt2bOutdoors » Mon Feb 11, 2019 12:13 pm

deanmoriarty wrote:
Mon Feb 11, 2019 12:07 pm
Hi,

In 2018, I sold some shares of a private illiquid company to a third party, for low 7 figures. The transaction was regulated by a proper contract written by lawyers, which clearly states which ones of my lots were sold, what was their cost basis, and what was the sale price.

The IRS doesn't know anything about this transaction, they only know my cost basis (since I acquired those via ISO exercise, I had to report it for AMT purposes on my tax returns a few years ago).

In TurboTax, I just followed the proper interview, and it seems to generate the right documentation (Schedule D, Capital Gain Worksheet, NIIT tax, form 8949 - Sales and Other dispositions of Capital assets, ...).

My question is: since the sale was not reported to the IRS by any brokerage firm (so there's no 1099-B essentially), should I send additional documentation to the IRS, such as a copy of the sales contract along with my return? Would that minimize the chances of me getting audited?

Thanks
How do you know it wasn't reported? Just because you did not receive a 1099-B, does not mean the seller did not send the IRS documentation. Report the sale as required. If the IRS wants additional information, believe me you will know about it. As far as an audit, there are many things that trigger an audit, things like the figures reported on a tax return, it doesn't matter if its right, they can still audit you. If you want to maximize your chances, send them more than they require, give them a lot of worms to look at. :twisted:
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Topic Author
deanmoriarty
Posts: 290
Joined: Tue Jan 28, 2014 1:19 am

Re: Reporting large private transaction to IRS?

Post by deanmoriarty » Mon Feb 11, 2019 12:15 pm

Grt2bOutdoors wrote:
Mon Feb 11, 2019 12:13 pm

How do you know it wasn't reported? Just because you did not receive a 1099-B, does not mean the seller did not send the IRS documentation.
I am the seller, and I know I didn't report anything to the IRS (I asked the lawyers who handled the contract if I should have done anything, they said it was not required).

Thanks

cherijoh
Posts: 6346
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Reporting large private transaction to IRS?

Post by cherijoh » Mon Feb 11, 2019 12:16 pm

deanmoriarty wrote:
Mon Feb 11, 2019 12:07 pm
Hi,

In 2018, I sold some shares of a private illiquid company to a third party, for low 7 figures. The transaction was regulated by a proper contract written by lawyers, which clearly states which ones of my lots were sold, what was their cost basis, and what was the sale price.

The IRS doesn't know anything about this transaction, they only know my cost basis (since I acquired those via ISO exercise, I had to report it for AMT purposes on my tax returns a few years ago).

In TurboTax, I just followed the proper interview, and it seems to generate the right documentation (Schedule D, Capital Gain Worksheet, NIIT tax, form 8949 - Sales and Other dispositions of Capital assets, ...).

My question is: since the sale was not reported to the IRS by any brokerage firm (so there's no 1099-B essentially), should I send additional documentation to the IRS, such as a copy of the sales contract along with my return? Would that minimize the chances of me getting audited?

Thanks
I would include a brief explanation of why there is no matching 1099B, but not send in additional paperwork until requested. For example "No 1099-B generated: Sale of interest in private holding under contract agreement".

Grt2bOutdoors
Posts: 21369
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Reporting large private transaction to IRS?

Post by Grt2bOutdoors » Mon Feb 11, 2019 12:20 pm

deanmoriarty wrote:
Mon Feb 11, 2019 12:15 pm
Grt2bOutdoors wrote:
Mon Feb 11, 2019 12:13 pm

How do you know it wasn't reported? Just because you did not receive a 1099-B, does not mean the seller did not send the IRS documentation.
I am the seller, and I know I didn't report anything to the IRS (I asked the lawyers who handled the contract if I should have done anything, they said it was not required).

Thanks
Then just report the sale and call it a day. If the IRS needs additional information, they will let you know.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Post Reply