AUR and transcript issue

Technical topics regarding tax preparation.
#1
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I have an ongoing issue with the AUR unit for over a year now. CP2501, then CP2000 and now Stat Notice of Deficiency. Never came across this before, perhaps someone else has.

TP reported sale of stock via dividend reinvestment program:
923.655123 shares ABC Inc proceeds 35,000, cost 34,900 gain 100

IRS insists that there is a second sale of same security:
923.655123 shares ABC Inc proceeds 35,000, cost 24,000 gain 10,000

Transcript downloaded 01/2021 shows both, both are shown as "Submission Type - original document". All documents TP provided she only had 1 transaction, 1099-B reflects the first with cost basis 34,900 box a reported to IRS. Calls div reinvestment plan -you only had 1 transaction 1099-B stands cost basis $34,900 and there are no corrected tax documents. Statement showing sale support this.

July 2021, IRS replies, no, you had 2 sales and we're assessing additional 10,000 of income.

Out of curiosity I check transcript again. Now, there is a 3rd transaction for the same stock:
923.655123 shares ABC Inc proceeds -0-, cost -0- and the "Submission Type - amended document".

I fax IRS again (July 2021), send the new transcript & explanation 1099-B etc.

Yesterday, Stat Notice of Deficiency arrives and includes both transactions so likely they ignored my July correspondence.

The thing is, how can I tell which of the 2 transactions the broker was voiding? The 100 gain, or the 10,000 gain. The only documentation TP has supports the 100 gain.

Any idea on the next step? Client is on the verge of paying 4K in tax to make this go away, plus whatever the state will get.
 

#2
dave829  
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Next step? Have client file the petition with the Tax Court.
https://www.ustaxcourt.gov/resources/forms/Petition_Kit.pdf

As for which transaction was voided, the correct transaction is shown on the client's brokerage statement. That's the document that needs to be submitted to the IRS. Once the petition is filed, the case will be forwarded to Appeals for settlement under Rev. Proc. 2016-22, and you can submit the brokerage statement at that time.
 

#3
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Thanks Dave. Is this something the TAS would handle? Faster resolution?
 

#4
dave829  
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TAS can't stop the clock running on the notice of deficiency. If the petition isn't filed, then the IRS will assess the tax, and then you will have a collection problem. And these days, "faster resolution" by TAS is a myth.

It only costs $60.00 filing fee to file a petition. It's the best way to go in this case.
 

#5
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Ok, thanks.
 

#6
BTJig  
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Dave, do you ever recommend the small tax case rules with these cases?
 

#7
dave829  
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BTJig, sure, when it's appropriate. Usually, though, it only makes a difference if the case is headed to trial.
 


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