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Schedule D and Form 8949

Form 8949, Sales and Other Dispositions of Capital Assets (i.e. stocks, bonds, mutual fund shares) was introduced in 2011. Before 2011, transactions for capital gains and losses were reported directly on Schedule D. Now, since 2011, these transactions must first be reported on Form 8949 and the totals from this form are carried to Schedule D.

Purpose of Form 8949

The reason for Form 8949 is that, the IRS is having brokers report the cost or other basis (your cost) for capital asset transactions, such as the sale of stocks, bond, or mutual fund shares. Brokers report these transactions annually on Form 1099-B, Proceeds From Broker and Barter Exchange Transactions (or substitute statement).

You must list these transactions on Form 8949 before completing Schedule D.

Form 8949 provides two sections: one section for reporting short-term capital gains and another section for reporting long-term capital gains.

In addition, in each section, you must check one of three boxes (Box A, B, or C).

Keep in mind, you only check off one of the three boxes (and one only) shown in Part 1 and Part II of Form 8949.

You May Have to Prepare More than One Form 8949:

If the cost or other basis of the securities being sold is not reported on Form 1099-B, in other words, box 3 is blank, you must use a separate Form 8949 to list these types of transactions.

Substitute Statement

If you receive a substitute statement showing multiple transactions (instead of a Form 1099-B for each individual transaction), the broker will indicate on the substitute statement whether basis for a transaction was reported to the IRS or was not reported to the IRS.

You must complete a separate Form 8949 to cover each of the three situations described above. In other words, if you have transactions where basis was reported, these transactions go on one Form 8949.

If you have transactions where basis was not reported, these transactions go on a separate Form 8949. And if you had capital asset transactions for which you did not received Form 1099-B (or substitute statement), you must list these transactions on a another Form 8949. Therefore, if you had all three situations, you would filed three Forms 8949.

Example:

You receive a Form 1099-B substitute statement showing multiple transactions:

For these transactions you need two Forms 8949: one to report the two transactions with basis reported by the broker to the IRS. And a second Form 8949 to report the transaction where no basis was reported to the IRS.

If you had gains and losses from capital transactions that were not reported to you on Form 1099-B, you would have to prepare another Form 8949 to report such transactions.

Completing Form 8949 and Schedule D (Form 1040)

When to Use Form 8949:

Complete Form 8949, Sales and Other Dispositions of Capital Assets and Losses BEFORE you complete line 1, 2, 3, 8, 9, or 10 of Schedule D.

Use Form 8949 to report the following items:

Form 8949 has two sections: one section to list your short-term gains and losses and a second section to list your long-term gains and losses.

To accommodate these reporting requirements for gains and losses, you need to be a bit more organized. You should separate gains and losses in the following order:

Basis

This is the amount you paid for the property plus any commissions or other fees. If you received the property as a gift, your basis is what the previous owner paid for it.

If you received the property as an inheritance, its basis is generally its value on the day the previous owner passed away.

Use Schedule D For the Following:

Need deductions?

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