Complicated Tax ? Cant find anyone who knows the answers

[fuscucla1]

What is the name of your state? California

I had a joint account at a broker. My partner had some fraudulent activity and the account was frozen by the SEC and then the money was seized. My partner pled guilty to a felony. The broker sent 1099s to the IRS

Now the IRS is contacting me for income taxes that are due on the money that the SEC froze and seized. I never saw the money, I signed it over to the SEC and they took it straight from my account. I even lost my own personal money in the freeze/seize. Someone else got the crime and the time, but I got the bill. I was never charged criminally. No court dates, nothing.

I asked the broker to reverse the 1099s and they are looking into it, but do I really owe this money? If anyone owes it why not go after my partner who pled guilty to stock fraud/manipulation??? How do I get this erased so I do not have to pay 108K to the govt who said that they were taking my 230K because it wasnt mine in the first place? I realize the SEC and the IRS are seperate entities, but if I cant keep something b/c its not mine then how can I pay tax on it??!?!?!?

 

[loku]

You did not give enough facts for me to be sure about this, but it sounds like you are being taxed on your share of the income from the account before it was seized. If that is the case, the IRS is correct in taxing you for that as income, because it becomes your income the instant it is earned by the account. However, you may be able to deduct the amount of your money that was seized as a loss, and that would offset the income.

 

[fuscucla1]

What other information would you like? If you prefer to email me you can reach me at [email protected]

 

[loku]

If the IRS contacted you, they probably gave you a schedule calculating what you owe. What is the explanation they gave?

 

[fuscucla1]

What they sent me is a proposed individual income tax assessment. I guess they are going to file for me since I didnt file, and I have 30 days to respond if I do not agree. I have contacted the broker to see if they can reverse the 1099s and they are looking into it.

 

[abezon]

If the IRS is basing its assessment on your 1099s, you need to file a return. 1099s show only the money you received for stock sales. You have to file Schedule D and tell them what your basis in the sales (what you paid for the stocks) is. Contact an IRS tax advocate (they're free) or see a tax preparer in your area to help you file a return. You *might* be able to argue that, since the account was seized, and you would have had to pay back the funds even if you had removed them from the account prior to seizure, you did not actually get final custody and control of the money, and therefore it wasn't income to you. You'll need a tax lawyer to take this to tax court. Good luck.