Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.
Q: My husband died in January 1993 and left a Smith Barney trust account to his daughter. Smith Barney sold the stock in the trust at a considerable gain, gave the proceeds to my stepdaughter and issued 1099B forms with my husband's Social Security number on it to me. On the advice of my CPA, I paid capital gain taxes for 1993, when this should have been my stepdaughter's responsibility. How can I amend this erroneous 1099B form for 1994?
A: The gain on the sale of the securities is clearly not taxable on your return, since the sale was made after your husband's death. You should file an amended return for 1993 removing the gain of the stock sale. Since the stock was in trust, the trust should file a fiduciary income tax return, and the income should be reported as distributed to your stepdaughter. This is done on a Form 1041 Schedule K-1. Your stepdaughter must also file an amended 1993 return to report the income distributed by the trust. Depending on the terms of the trust, it is possible that the stocks received a "step-up" in basis upon your husband's death. This means that the stocks are treated as if they had a cost equal to the fair market value at the time of your husband's death. This could greatly reduce any gain on the sale.
The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.
To submit a question, call Sundial, The Sun's telephone information service, at (410) 783-1800. In Anne Arundel County call 268-7736, in Harford County 836-5028, and in Carroll 848-0338. Using a touch-tone phone, enter 6225 after the greeting. Push 1 to submit a tax question; state the question in full. Push 2 to hear a tax tip. Selected questions will be answered in the Business section. No questions will be answered by phone. Please leave your name and phone number.