The Internal Revenue Service offered advice to taxpayers and preparers about a new form they will need to use to report most capital gains and losses from transactions relating to investment property.
In previous years, the IRS noted, such transactions would have been reported on a Schedule D or D-1, but for tax year 2011, taxpayers and their preparers must use Form 8949, “Sales and Other Dispositions of Capital Assets.”
The IRS noted that short-term capital gains or losses (assets held for one year or less) must now be reported on Part I of Form 8949. Long-term capital gains or losses (assets held for more than one year) are now reported on Part II of Form 8949.
Taxpayers need to fill out Form 8949 before filling out line 1, 2, 3, 8, 9 or 10 of Schedule D.
Most property owned and used for personal purposes, pleasure or investment is a capital asset, the IRS noted. Form 8949 should be used to report the sale or exchange of a capital asset that is not being reported on another form or schedule, such as Form 6252 or 8824.
At the top of each Form 8949 that is filed, taxpayers or their preparers will need to check off box A, B or C, based on what is indicated in box 3 of Form 1099-B or a substitute statement. Box A must also be checked off if a broker reported the transaction to the taxpayer, and the basis of the securities sold was also reported to the IRS.
Box B should be checked off if the transaction was reported to the taxpayer, but box 3 of the Form 1099-B is blank or the statement says the basis was not reported to the IRS. Box C should be checked off for all other transactions.
If taxpayers have many transactions to report, they should use as many 8949 forms as they need to report all of them, but make sure that each Form 8949 includes only the type of transactions described in the text for the box that was checked, whether it is A, B or C.
The reporting of certain transactions has changed. If taxpayers have to adjust the gain or loss, they may have to enter a code in column (b) and an adjustment in column (g). For details, see the 2011 Instructions for Schedule D (and Form 8949).
For 2011 transactions, Schedule D-1 is no longer in use. Form 8949 replaces it.
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