If you were one of the procrastinators who applied for an automatic four-month extension back in April, your time is up. You must file your 1998 tax return by midnight on Aug. 16. So come in off the golf course. You've got numbers to crunch.
Don't forget to include the amount you paid with
-- Automatic Extension of Time to File U.S. Income Tax Return
back in April on line 61 of your
-- U.S. Individual Income Tax
For some more last-minute filing tips, be sure to check out a previous
If, for some reason, you still can't get it together in time, you can apply for another two-month extension by using
-- Application for Additional Extension of Time to File U.S. Individual Income Tax Return
. But this time you need a
excuse that the
Internal Revenue Service
Don't expect "working hard to lower handicap" to work. But "unable to obtain necessary documents to prepare return" just might. So be sure to support your excuse with solid details.
Note that if the IRS does not approve, you've got 10 days from the time you get the rejection notice to file your return and include any balance due.
Now let's move on to your questions. This week, we're filling out
-- Capital Gains and Losses
, talking about 403(b) plans and figuring out how puts relate to those confusing constructive sale rules.
Any other last-minute questions? Then send them on to
firstname.lastname@example.org, and we'll address them in a bonus Tax Forum this coming Tuesday. And please don't forget to include your first and
When Can I List Capital Gains as 'Various?'
From your example of Mike Bauer's tax return, you filled out VARIOUS in date of purchase in Schedule D. When can you use this? Can you also use VARIOUS for the dates of sales? Also, when filling out Schedule D and the attachment, do I need to specify the individual dates of purchase and sales (especially certain stocks I daytraded heavily on swings)? My broker sends a monthly transaction record showing dates of transaction, shares and amount -- will a copy of that suffice or should I format my attachment similar to the format in Schedule D and use that instead? -- Emman Ablaza
Although we've reported this
before, in light of the upcoming tax due date, it's worth repeating.
If you have tons of trades, you do not need to list them all out on your Schedule D, especially if your brokerage statements include the buy/sell dates, shares and prices. Just write "see attached statements" in the first column of Schedule D and include your brokerage statements with your tax return.
You can write "various" in
the date of purchase column and the sales column. The IRS will assume that all your sales were made on various dates in 1998.
Then just include the grand total of all your sales that year. Make sure that amount matches the sales number reported on your
-- Proceeds From Broker and Barter Exchange Transactions
. The IRS already has a copy of your 1099B in its computer system. When you file your return, the system automatically looks for a matching sales number.
Here's a tip: If your broker's statements are just too voluminous to attach, hold on to them and write, "Schedules available. Transactions too numerous to list" in that first column, suggests Winawer.
But just because you don't include those statements, don't think you're getting away with anything. The IRS can come back to you at any time and question each and every one of your trades. So be prepared and keep everything on file.
Can I Roll My 403(b) Into an IRA?
My wife has a 403(b) account with TIAA-CREF that she contributed to while working for a school district. Her new school district does not have a 403(b). Is it possible to roll over the 403(b) to an IRA? Any documentation on how to do it? -- Charles Reyes
A reminder: A 403(b) plan is basically a 401(k) plan for nonprofit organizations.
First call TIAA-CREF, the big teacher's pension company, to make sure there aren't any restrictions on her 403(b) money. Depending on the plan, the money sometimes is subject to certain age, time and employment provisions that may prevent holders from moving it, says Rich Amadio, senior individual consultant at TIAA-CREF. But generally, once you leave a job, you're free to move the money.
So assuming there are no restrictions on her 403(b) money, your wife absolutely can roll the account into an IRA. All she has to do is contact TIAA-CREF and make the request.
Any fund company that offers an IRA should accept the rollover, so she is not required to stay with TIAA-CREF. So call your favorite fund family and roll away.
Can Using Puts Be Constructive?
It is my understanding that the purchase of put options to protect against losses can also run afoul of the IRS regulations on constructive sales. True or False? -- Owen Brice
The short answer is: true.
Now here's the long answer.
The constructive sale rules kick in when you enter a trade "short against the box."
In simplest terms, when you short against the box, you short a stock you already own. We addressed this trade in a recent
Tax Forum, so be sure to check it out for details.
The constructive sale rules say that when you short against the box, you've effectively "constructed" a sale, and you must account for it by "selling" your long position the day you create that short sale. That means you have to report a capital gain or loss on those shares as of that date, even though you clearly still hold them.
To prevent this tax nightmare, you must do two things:
Close out your short position by the 30th day after the end of the tax year in which the transaction occurred.
Beginning the day the short position is closed, hold the original long position naked for at least another 60 days. That means, for 60 days, you can't use options on those shares to reduce your risk.
So you can't use puts during that naked 60-day period.
Basically, the constructive sale rules say that you can't do anything to diminish your risk during that period, notes Gail Winawer, tax securities partner at
American Express Tax & Business Services
in New York. So shorts, options, swaps -- anything that helps you to lock in a price and thereby diminish your risk -- are all out.
If you held a put option during that 60-day period, the constructive sales rules would kick in and you would be required to "construct" a sale and report the gain on the day you created the short position.
But what if the put doesn't offer a lot of protection, i.e., is only slightly in the money? Who knows? Like practically very other tax rule in the options world, we have no hard guidance from the IRS. "We've all been waiting since the 1997 Taxpayer's Relief came out for more details," says Winawer.
She says more guidelines are expected to come out in November, but I'm not holding my breath. So for now, this never-ending vagueness is all we've got.
TSC Tax Forum aims to provide general tax information. It cannot and does not attempt to provide individual tax advice. All readers are urged to consult with an accountant as needed about their individual circumstances.