IB 1099-B appears to have many errors

I have a question that someone may have the answer to. I bought a Canadian stock and sold it in 2011. On IB's 1099B form, the proceeds are $1,612.92 and the cost basis is $1,323.80. According to my daily statements from IB and by my own calculations, my proceeds should be $1,602.86 and the cost basis is $1,318.56.

So according to the 1099B from IB, my profit on the trade was $289.12 but according to my records it was $284.30.

Of course there is a currency component going on in these trades that is being glossed over. Now an important fact is that I have Mark-To-Market status. And IB's daily statements (which match my records) appear to be always calculated using mark-to-market. My question then is, do I report my foreign stock transactions on Form 4797 using my mark-to-market calculations, or will these be incorrect? I would put a note in the tax return about the discrepancy between my calculations and the 1099B.

The only reference that I found on the web dealing with this situation was this one (after the google search click on the first link that comes up - if I don't link to it this way, the website asks for registration):

https://www.google.com/webhp?comple....,cf.osb&fp=e50b7ed8b228eb18&biw=1418&bih=735

That article says that for a person using the "cash method" of stock accounting (note that I am using mark-to-market), that the currencies involved in stock transactions are evaluated on the settlement date and not the trade date. Is this the reason for this discrepancy on my 1099B?

Any other thoughts?
 
Sprsptd:
I did not make any notes about it as I had no "foreign" trades, but I think that Nancy Nelson(?), the IB tax specialist, said that they prepared the 1099-Bs using the closing spot price. So what you are seeing on the 1099-B is the US $ amount. I don't recall precisely what she said about the purchase versus sale, but you could figure that out by looking at your records and seeing if both were converted at the same rate.

Jack
 
Quote from JackR:

Sprsptd:
I did not make any notes about it as I had no "foreign" trades, but I think that Nancy Nelson(?), the IB tax specialist, said that they prepared the 1099-Bs using the closing spot price. So what you are seeing on the 1099-B is the US $ amount. I don't recall precisely what she said about the purchase versus sale, but you could figure that out by looking at your records and seeing if both were converted at the same rate.

Jack
More...

Thanks Jack,

I just did some calculations using the closing spot prices listed on the daily statements that IB provides. If I use the closing spot prices from the trade date, it matches what I am reporting on my Form 4797 (mark-to-market accounting). If I use the closing spot prices from the settlement date (T+3 for Canadian stocks), it matches what IB is reporting on Form 1099B (actually it matches within a penny on both proceeds and cost basis).

So as a mark-to-market trader, which way do I report it on Form 4797?

Robert Green, are there any examples of this type of transaction in your tax packages (Bronze, Silver, Gold. etc.)? If so, I'll just purchase them (again).
 
Sprstpd:

I was intrigued and cranked up the webinar. She says there will be a difference between the statements, that use mark-to-mark values, and the 1099-B numbers. Nancy confirms what you found, though she does not mention settlement date, just the purchase/sale date. She covers this starting at 11:40 into the webinar.

For tax reporting. I'd look at my statement and see what date my cash went down/up and by what amount. The difference is the amount you actually made and owe tax on. Certainly that will be easy to explain in an audit.

Jack
 
If the IRS is only going to go by the 1099-B's, then doesn't calculating wash sales across multiple brokers (for those that use multiple brokers) a stupid thing to do as the IRS will go by the 1099-B's exclusively & you'll get audited for filing trade info that doesn't match the 1099-B's????


Why not just (if you use multiple brokers or just one) put on your tax form exactly what's on the 1099-B to avoid any hassle?
 
Quote from jackpearson:

If the IRS is only going to go by the 1099-B's, then doesn't calculating wash sales across multiple brokers (for those that use multiple brokers) a stupid thing to do as the IRS will go by the 1099-B's exclusively & you'll get audited for filing trade info that doesn't match the 1099-B's????


Why not just (if you use multiple brokers or just one) put on your tax form exactly what's on the 1099-B to avoid any hassle?
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Not highly probable, but if you did get audited, they might find that you took a loss on your tax return when you weren't supposed to. I'd rather calculate the correct amounts on my return and append a note explaining the difference on the 1099B.
 
Quote from JackR:

Sprstpd:

I was intrigued and cranked up the webinar. She says there will be a difference between the statements, that use mark-to-mark values, and the 1099-B numbers. Nancy confirms what you found, though she does not mention settlement date, just the purchase/sale date. She covers this starting at 11:40 into the webinar.

For tax reporting. I'd look at my statement and see what date my cash went down/up and by what amount. The difference is the amount you actually made and owe tax on. Certainly that will be easy to explain in an audit.

Jack
More...

Thanks Jack,

I did listen to that entire webinar but unfortunately there wasn't much detail on the foreign stock transactions portion of the talk. Nancy says there will be a discrepancy between the 1099B numbers and their mark-to-market daily statements, but she doesn't really explain why there is a difference. Or maybe she does but I am not following her explanation.

It makes more sense to me as a mark-to-market trader that I evaluate my foreign stock transactions using the spot price of the trade date. For example, it seems counterintuitive that I would have to use 2012 spot values to value trades I made on the last days of December 2011. But of course, what makes sense doesn't always equate to what is actually the tax law.
 
Quote from sprstpd:

Thanks Jack,

I just did some calculations using the closing spot prices listed on the daily statements that IB provides. If I use the closing spot prices from the trade date, it matches what I am reporting on my Form 4797 (mark-to-market accounting). If I use the closing spot prices from the settlement date (T+3 for Canadian stocks), it matches what IB is reporting on Form 1099B (actually it matches within a penny on both proceeds and cost basis).

So as a mark-to-market trader, which way do I report it on Form 4797?

Robert Green, are there any examples of this type of transaction in your tax packages (Bronze, Silver, Gold. etc.)? If so, I'll just purchase them (again).
More...

Tax reporting is trade date, not settlement date. Brokerage statements are settlement date. 1099-Bs should be tax reporting based on trade date. Odd, you mention IB reconciles with settlement date. I'll ask my colleagues at GreenTraderTax to comment on this further, as they do the tax prep and work with different brokerage firm 1099-Bs every day.

Our examples guides have Form 4797 examples for Section 475 MTM traders. Thanks.
 
Quote from Robert A. Green:

Tax reporting is trade date, not settlement date. Brokerage statements are settlement date. 1099-Bs should be tax reporting based on trade date. Odd, you mention IB reconciles with settlement date. I'll ask my colleagues at GreenTraderTax to comment on this further, as they do the tax prep and work with different brokerage firm 1099-Bs every day.

Our examples guides have Form 4797 examples for Section 475 MTM traders. Thanks.
More...

Yes, tax reporting is trade date, but my example involves foreign currencies as well. And according to that google search link I had before, for people using the "cash method" for reporting stock transactions, they should evaluate the currency conversion on settlement date, not trade date.

As for your guides, do they have specific examples involving foreign stock transactions, i.e., that involve currency evalutations both for regular accounting and mark-to-market accounting? Thanks.
 
Quote from Robert A. Green:

Tax reporting is trade date, not settlement date. Brokerage statements are settlement date. 1099-Bs should be tax reporting based on trade date. Odd, you mention IB reconciles with settlement date. I'll ask my colleagues at GreenTraderTax to comment on this further, as they do the tax prep and work with different brokerage firm 1099-Bs every day.

Our examples guides have Form 4797 examples for Section 475 MTM traders. Thanks.
More...

There is an exception to using trade date rules for closing short sales of losing positions at year end. In that case, the trade date is really the settlement date, since delivery of the securities is required for a completed trade. The exception doesn't apply to selling a short sale at a gain, in that case the initial trade date applies for tax reporting purposes.
 
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