If you sell stocks, bonds, derivatives or other securities through a broker, you can expect to receive one or more copies of Form 1099-B in January. This form is used to report gains or losses from such transactions in the preceding year. People who participate in formal bartering networks may get a copy of the form, too.
Information on the 1099-B
In most cases, a 1099-B form provides information about securities or property involved in a transaction handled by a broker. This includes:
- A brief description of the item sold, such as “100 shares of XYZ Co"
- The date you bought or acquired it
- The date you sold it
- How much it cost you to acquire it
- How much you received for it when you sold it
- Whether your broker withheld any federal tax
Also, the form indicates whether any gain you made from a sale—or any loss you incurred—was “short-term” or “long-term.”
How Form 1099-B is used
The 1099-B helps you deal with capital gains taxes. Usually, when you sell something for more than it cost you to acquire it, the profit is a capital gain, and it may be taxable. On the other hand, if you sell something for less than you paid for it, then you may have a capital loss, which you might be able to use to reduce your taxable capital gains or other income.
You pay capital gains taxes with your income tax return, using Schedule D, and the data from Form 1099-B helps you fill out Schedule D.
Short-term and long-term gains
Box 2 of the form tells whether the gain or loss involved is short-term or long-term. If you owned an asset, such as stock, for a year or less before selling it, any gain or loss from a sale is short-term.
If you owned it for more than a year, you have a long-term gain. The distinction is extremely important, since tax rates on long-term gains are generally significantly lower than those on short-term gains.
A secondary use of Form 1099-B is to report barter exchange transactions.
- A barter exchange is a network of people or companies who agree to trade property or services with one another without accepting payment in U.S. dollars.
Barter exchanges use Box 13 of the form to report the fair market value of all goods and services received by an individual member of the exchange over the course of a year. In general, value received through a barter exchange is considered income and may be taxable.
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