Skip to main content

TSC's Tracy Byrnes and Martin Nissenbaum chatted on Yahoo! on Tuesday, Apr. 4. As with all chats, this transcript is unedited.

TSCtracy:

Hi all! Sorry about the delay -- technical difficulties!

thestreet_martin:

What else is new?

TSCtracy:

But we're back and ready to rock-n-roll! Now without further tech complications -- I bring you Martin Nissenbaum, our all-knowing tax expert. Take it away!

thestreet_martin:

Thanks Tracy.

christian_volk asks:

I received a stock grant from a pre-IPO company. How do I report this on my 1040? Any additional forms required?

thestreet_martin:

The value of the stock should have been included on your form w-2 if you're an employee or on a 1099 if you're not an employee report it on a schedule c or on line 7 of your 1040.

Wowdy_Howdy asks:

If my wife does not work, do I qualify for a spousal IRA deduction??

thestreet_martin:

TheStreet Recommends

Yes, by definition a spousal IRA applies to a spouse without earned income, so you can both have a 2000 IRA as long as your earned income is 4000 or more.

laloma asks:

Hi - I am considering filing on the web, but wonder if it is safe. Any thoughts?

thestreet_martin:

Filing on the web is secure but the only real benefit is that you get your refund faster and you can't use it if you have attachments to your return other than the w-2.

TSCtracy:

Check out the chart we did of all your online options www.thestreet.com/funds/taxes/892841.html.

el_sweenyo asks:

I've lost my tax forms from last year and need to know how to get my roth conversion amount for this year's taxes. Any help?

thestreet_martin:

You should have received a notice from the IRS showing the amount to be included this year also you can check with the bank or broker or mutual fund for a copy of last year's reporting form

zubatch asks:

I contributed to two ROTH IRA's this year, what kind of trouble will I get into?

TSCtracy:

well its nearly as extreme as getting into a bar fight or anything like that

thestreet_martin:

if they're both for you (as opposed to spousal roth iras) there should be no problem as long as you take out the excess (plus income) no later than the due date of your 1999 return

el_sweenyo asks:

How long do you have to own ISO options to be eligible for long term capital gains?

thestreet_martin:

To get LTCG you have to hold the stock received on the exercise for 1 year from exercise and at least 2 years from the grant of the option the post exercise appreciation will be ltcg as long as you held the stock for more than 1 year after exercise.

TSCtracy:

Hey zubatch -- remember -- your total contributions can't exceed 2000 -- to all your IRAs.

duck_soupy asks:

To what extent is margin interest tax deductible ?

TSCtracy:

Good question.

thestreet_martin:

Margin interest is deductible only if you paid it during the year (not if it was just added to your debit balance). It's deductible to the extent of your investment income for the year - interest, dividends, short term capital gain.

TSCtracy:

Read this for more grist: www.thestreet.com/funds/taxforum/910832.html.

thestreet_martin:

Long term capital gain can be treated as investment income if you elect to have it taxed at ordinary rates.

TSCtracy:

You should hear Martin typing away!

thestreet_martin:

Any excess investment interest can be carried forward to future years and deducted based on investment income in those years.

el_sweenyo asks:

How should foreign real estate be accounted for, or do you have to claim it at all?

thestreet_martin:

If it's a second home you can deduct interest and real estate taxes

TSCtracy:

Just b/c the property is out of the US doesn't mean Uncle Sam doesn't want a piece of it.

thestreet_martin:

If it's business property make sure you report income and expenses on scheule e.

christian_volk asks:

What if I never received a 1099 for my stock options grant? Do I need to request that they send one? Or can I just declare it without the 1099?

thestreet_martin:

You can always declare income (the IRS won't say no) but it should have been on a w-2 if you were an employee and taxes withheld.

TSCtracy:

Hey Martin, any idea why option trades are not reported to the IRS?

thestreet_martin:

Probably strong lobbying by the options board.

TSCtracy:

hee hee

thestreet_martin:

But you do have to report your profits on options.

TSCtracy:

But of course.

thestreet_martin:

And take losses.

el_sweenyo asks:

Sorry not getting back to my roth conversion, is the amount of my conversion just divided by 4? or is this a more complex calculation?

TSCtracy:

Don't be sorry.

thestreet_martin:

If you converted in 1998 and did not elect to accelerate inclusion you just divide the value at conversion by 4 and that's it.

TSCtracy:

But if you converted in 99, you no longer have that option. no more 4 year spread.

thestreet_martin:

But you should have gotten that notice from the IRS.

BrookeS_us asks:

How do you figure cost basis of stock from a 1099-B on Schedule D?

thestreet_martin:

The 1099b shows the net proceeds from the sale of stock your basis is whatever you paid plus commissions and other expenses the difference is your gain or loss.

mjqdelmar asks:

Is mark to market the only way to avoid the wash sale rule?

thestreet_martin:

Yes, unless you're a dealer you may also be able to use other entities that you have an interest in, such as an IRA, to avoid these rules.

mjqdelmar asks:

I am filing as a Trader under sec.475. If I have a wash sale can I offset it by selling the underlying stock before year end?

thestreet_martin:

You made the election under 475f, you had to be a dealer first. The election doesn't make you a dealer.

TSCtracy:

¿or a trader.

thestreet_martin:

Once you make the election, the wash sale rules simply don't apply and since you mark to market no sale is necessary.

TSCtracy:

Remember, to MTM in 99, you had to make this election on your 98 tax return. Read this for more info: http://www.thestreet.com/funds/taxes/880943.html.

christian_volk asks:

If I was granted these options in March of 1999, and the company (not my employer) is doing an IPO in July...how long do I need to hold it to qualify for LTCG?

thestreet_martin:

If the options are non-compensatory options then your holding period for LTCG begins on the date of exercise unless you do a cashless exercsie.

thestreet_martin:

If the exercise is cashless it would be considered a reorganization and you would get a tacked holding period, including the period you held the option.

TSCtracy:

Really? Wow.

spinner777_2000 asks:

Hello, Martin. This may be a stupid question but does the earlier that we file effect how soon we receive the refund?

thestreet_martin:

You won't get your refund until you file so the sooner you file the sooner you get a refund. Also, if you file sooner (too late now) the IRS has less returns to process so the refund may get out sooner.

TSCtracy:

And you don't want to deal with the IRS when it has tons of processing to do!

thestreet_martin:

The IRS has 45 days from 4/17 to send you the refund without interest

TSCtracy:

It gets confused.

greg54206 asks:

I have ST losses in 1998, big gains in 1999. Can I use only part of the losses?

thestreet_martin:

I assume you're carrying the losses over from 1998 to 1999. You can offset them dollar for dollar against gains in 1999 plus 3000 against ordinary income.

TSCtracy:

Read this for more on carry forward losses: www.thestreet.com/funds/taxforum/907601.html.

greg54206 asks:

I have more Short-term losses from 1998 than I can use. Can I roll the excess over to 2000?

TSCtracy:

98 was a bad year, huh?

thestreet_martin:

If you have carryover losses from 1998 which exceed (1999 gains + 3000) you can carry the excess over to 2000 and perpetually thereafter until you die. The losses are personal to you so your spouse can't use them after you die. Same goes for charitable contribution carryovers.

christian_volk asks:

By the way, the company that granted the stock options (not my employer) never sent a 1099...is this a problem?

thestreet_martin:

It's not a problem, but remember the 1099 is due when the option is exercised not when it's granted. The problem is the company can't take a deduction unless it issues you a 1099 or gets confirmation from you that you included the income.

thestreet_martin:

But if you don't pick up the income now you may have a surprise in the future since the company can issue a 1099 later when it wants to take the deduction.

greg54206 asks:

Where do I read it?

thestreet_martin:

Look at the instructions for schedule d lines 6 and 14

TSCtracy:

What happens if you get an incorrect 1099???? I know that has happened to a ton of our readers.

thestreet_martin:

Make sure you go back to issuer and have it corrected before you file your return. If necessary file for an extension so that you won't get unwanted correspondence (is there any other kind?) from the IRS or have to file an amended return.

TSCtracy:

Can you tell us some IRS red (audit) flags)?

thestreet_martin:

More like pink flags with the new user friendly IRS.

TSCtracy:

Although I know its auditing staff is very low....

thestreet_martin:

Home office deductions, deducting cars contributed to charity, making arithmetical errors on your return big losses from option transactions.

TSCtracy:

Why home office deductions?

thestreet_martin:

The law changed in 1999 to make the home office deduction more available, but the IRS is looking for people who are becoming even more aggressive and taking the law change as carte blanc to deduct everything.

TSCtracy:

Any word on increasing Roth IRA contribution?

thestreet_martin:

There are a number of legislative proposals to raise the limit but not likely this year.

christian_volk asks:

Pardon my ignorance, but when is the option considered "exercised?"

TSCtracy:

Stop apologizing!

thestreet_martin:

When you pay the option price and the company gives you the stock the option is "exercised." If the option is not qualified you have ordinary compensation to the extent the value of the stock exceeds the exercise price.

TSCtracy:

That means its not an incentive stock option -- its a nonqual.

thestreet_martin:

There are no stupid questions, only stupid answers if you're an employee the "spread" will be included in your w-2, otherwise it'll be on a 1099.

kidthom asks:

I own a house with 5 acres, and I decided to sell 1.5 of those acres last year. I would be getting that tax free if I sold the house too, would that still hold true by just selling part of the property first?

thestreet_martin:

If you sell the property and the house is sold afterwards, but they both sold as part of a single transaction you could take the exclusion. But remember, it's limited to 500,000 joint, 250,000 single.

zubatch asks:

Tracy, are you the babe that hosts the Fox News Show TSC?

TSCtracy:

Unfortunately, I am not the "babe" who hosts TheStreet.com TV show. Brenda Buttner is. And the mother of 2 would be thrilled to hear that you think she's a "babe!"

TSCtracy:

Thanks though!

TSCtracy:

Martin -- thank you so much for putting up with our technical difficulties and taking all our questions during this crazy time of year! Please come back again!!!!

laura_the_street:

Thanks for joining us today.

thestreet_martin:

I will.

TSCtracy:

Hope you all survived today's debacle!

laura_the_street:

If you missed any part of today's chat, have a look at www.thestreet.com shortly for the transcript.

TSCtracy:

See ya!

thestreet_martin:

Kewl, bye.