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Posted by Arthur Kamlet on June 5, 2007, 3:20 pm
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> kam...@panix.com (Arthur Kamlet) wrote:
>>> I got a notice from the IRS for 2005 for discrepancies on my
>>> Schedule D. I looked at it and it turns out I had sold short
>>> shares that were not covered until 2006 and therefore did
>>> not need to be reported on my D (but were reported by my
>>> brokerage on the 1099).
>>>
>>> My question is is it a requirement to include a statement
>>> explaining this or is it just smart to avoid getting the
>>> letter (and hassle) later? I looked in Pub 550 and didn't
>>> see anything stating this was a requirement (or even
>>> suggesting to do it).
>> Pub 550 used to be more exacting, and more helpful
>>
>> The best I could find this year is a Pub 550 statement right
>> in the middle of page 67 that says Emily reconciles the
>> Schedule D Sales columns and makes sure they are not less
>> than the reported amounts of the 1099Bs.
>>
>> Then you can use your memory of what the Pub or the Schedule
>> D instructions used to say, and attach a statement when the
>> 1099Bs are more than the Sales Price columns.
>>
>> But when you have short positions remaining open at year
>> end, just say so right on the schedule D.
>>
>> I do this by entering "Short position remaining open
>> 12/31/06" on the line below the report of the short sale.
> I guess what I am wondering is do I have to amend my 2005
> return or just let them know the difference was due to open
> short positions? I notified them already but did not amend
> my return.
Since you already received a Notice from the IRS, I would
fill out a Corrected Schedule D (Mark Corrected and date in
Red at top) and send a letter along with it and the notice
itself, and explain in your letter that, as shown in the
Corrected Sch D, the Excess of 1099-B amounts over Sch D
Sales Columns was due to the short positions listed in the
Corrected Sch D remaining open as of 12/31/06.
In the future, Sch D should contain those short sales
amounts along with a notation they remained open at year
end.
Do not file a Form 1040X since they are already examining
your return and you are now explaining the difference.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
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