If you exchange or sell capital assets, you’ll be required to report these transactions on your income tax return. Examples of capital assets may include artwork, land or stocks. Regardless of the transaction being profitable or non-profitable, long-term or short term, the details must be provided on IRS Form 8949 in order to calculate the correct amount of your total income.
To report capital gains or losses, you may file IRS Form 1040 Schedule D. Though, before entering any net loss or gain on Schedule D, you’ll have to file Form 8949.
What is IRS Form 8949?
Form 8949 is known as the Sales and Other Dispositions of Capital Assets. It is a two-page document made up of two parts. The first part is to be completed for short-term transactions, the second is designed for long-term transactions.
A long-term taxable exchange or sale is one that occurs no less than twelve months from the day the capital asset was obtained. A short term taxable sale is a sale that has been made within the last twelve months. Information about the transaction you’ll be describing in IRS Form 8949 will have been specified in your 1099-B, known as the Proceeds from Broker and Barter Transactions.
What is IRS Form 8949 Used for?
The form is used to declare all exchanges or sales of capital assets. This document allows you to reconcile the gain that was reported to the Internal Revenue Service on your 1099-S and 1099-B with all sums that you reported on your income tax return. The form may be filed by individuals and by corporations.
Individual taxpayers must file Form 8949 to report any income from involuntary capital asset conversions (except for theft or casualty), exchange and sale of real estate that is not reported on any other form or schedule and non-business bad debts. Corporations may report the same transactions including non-distinguished long-term capital income from your 2439. Additionally, companies may use IRS Form 8949 to provide information about their share of loss or gain from the trust, estate or partnership.
How to Complete IRS Form 8949?
Begin by indicating your name as it is written on your return as well as your taxpayer identification number or social security number. Then, choose what part of the form applies to your transaction(s). Fill out the first part for short-term transactions. For long-term transactions, your task is to complete the second part.
Regardless of the transaction type, you’ll need to provide the following information on your 8949:
- Description of the property you’ve sold or exchanged
- Date the property was obtained
- Date the property was sold or exchanged
- Price of the property
- Gain or loss
- Other adjustments
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