Cap Gains Calculation - How to decipher line items on 2019 tax transcript?

Is there a specific section on the transcript that would indicate whether it was from a mutual fund or actual stock sale? And what's the difference in terms of how they're taxed? I think I had some random investment account from when I was in college that might have generated this.

The transcript itself doesn't typically show the source details - it just summarizes what was reported on your return. Looking at the actual 1099 forms that were filed would give you that level of detail. As for taxation, both mutual fund capital gain distributions and actual stock sales get reported as capital gains, but there's a key difference. Mutual fund distributions are automatically reported as capital gains even when you didn't personally sell anything - the fund manager's trading activity generates these gains that get passed to shareholders. These are usually reported on Form 1099-DIV. Actual stock sales where you personally sell shares would show up on Form 1099-B and be reported on Schedule D of your tax return.

Does it work with the actual transcript PDFs from the IRS? I have those but not my original tax return. Also, is there a limit to how many documents it can analyze?

I'm hesitant to upload tax documents to random websites... how do you know it's secure? Seems risky with all the identity theft going around.

Yes, it works perfectly with the transcript PDFs from the IRS! That's exactly what I used. The system is actually designed to read those government-format documents and break them down into understandable chunks. Regarding security, I had the same concern initially. They use bank-level encryption and don't store your documents after analysis. They actually explain their security approach on their site - the documents are processed and then automatically deleted. I researched them before uploading anything and felt comfortable with their privacy policy.

How does this actually work? Does it just call the IRS for you? I don't understand how it gets through when normal calls don't.

Yeah right. Nothing gets through to the IRS these days. I've tried calling like 20 times about an issue and either get disconnected or told the wait is over 2 hours. If this actually works I'll eat my tax forms.

It doesn't just call for you - it navigates the IRS phone tree and waits in the queue for you. When an agent actually picks up, it calls your phone and connects you directly to that agent. It's basically handling all the waiting and menu navigation so you don't have to sit there listening to hold music for hours. The reason it works is because their system can sit in those long queues 24/7 and keep trying different optimal calling patterns until it gets through. Once someone answers, that's when it connects you. It's not magic - just really smart automation that does the frustrating part for you.

For inherited stocks, you actually get what's called a "stepped-up basis" - meaning your cost basis becomes the fair market value of the stocks on the date of death (or alternative valuation date if the estate elected it). You don't need to know what your uncle originally paid. This is actually a significant tax advantage of inheritance. When you eventually sell, your capital gain or loss will be calculated from this stepped-up basis, not the original purchase price. You should be able to get the values from the executor of the estate or by looking up historical stock prices for that date.

Oh that's a huge relief! I was stressing about trying to track down decades-old purchase records. So I just need to document what the value was on the date he passed away? That's much easier since it was only last year and I can look up the historical prices online. Do I need any special documentation to prove that value in case of an audit? Or is just having the date of death and the corresponding stock values enough?

Yes, just document the closing price on the date of death. For additional protection, I suggest taking screenshots or printing the historical price information from a reputable financial website and keeping that with your tax records. If the estate was large enough to file an estate tax return (Form 706), that document would also have the valuation information and would be excellent documentation. But for most people, good records of the date of death values from reliable sources are sufficient for audit protection.

The IRS generally keeps transcripts available for the current tax year and the prior three years through their online system. But they actually maintain records for much longer - typically 7-10 years. For 2016 records, you'll probably need to complete Form 4506-T and mail or fax it to request older transcripts. Or call them directly. There's usually no fee for transcripts (unlike actual tax return copies which cost $50 each).