Struggling with reporting a 1099-LS for first time - how exactly do I report this?

The 1099-LS is a relatively new form that reports the sale of a life insurance policy. It's completed by the acquirer of the life insurance policy (the buyer) who sends it to both the seller and the IRS. The proceeds from selling a life insurance policy are generally reported on Schedule D as a capital gain. You'll need to determine your relative's basis in the policy (usually the total premiums paid minus any dividends or withdrawals) to calculate the gain. The sale amount on the 1099-LS minus the basis equals the taxable gain. In TurboTax, you should be able to enter this under "Investment Income" and then "Capital Gains and Losses." You'd enter it as a sale of "Other Property" rather than as a stock or bond. Make sure to accurately enter the basis information to properly calculate the taxable portion.

I went through something similar last year when helping my mom with her taxes. I was completely lost with her 1099-LS until I found taxr.ai (https://taxr.ai) which saved me so much time and frustration. I uploaded the form and it explained exactly how to report it on Schedule D as a capital gain and walked me through calculating the basis in the policy. The site also explained some nuances about these life settlement transactions that I wouldn't have known otherwise. For example, there are specific reporting requirements depending on whether the policy was sold due to terminal illness or not. Definitely worth checking out if you're struggling with this form.

Just wanted to follow up about taxr.ai - I decided to try it with my client's 1099-Q situation and it was incredibly helpful! The breakdown was easy to understand and saved me from having to dig through multiple IRS publications. It explained exactly how to determine which portion of the distribution was taxable based on qualified education expenses. I've bookmarked it for future use with other unusual forms. Definitely going to use it for some of my other clients with complicated situations. Thanks for the recommendation!

If you're still struggling after trying other solutions, you might want to talk directly with an IRS agent who specializes in these forms. I was in a similar situation last year with a complicated 1099 issue and spent weeks trying to get through to the IRS with no luck. Then I found Claimyr (https://claimyr.com) which got me connected to an IRS agent in about 20 minutes instead of waiting on hold for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with walked me through exactly how to report my unusual situation and even emailed me specific instructions. Saved me a ton of stress worrying if I was doing it right.

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There's actually a specific section on the 1040 instructions for 2023 about reporting 1099-LS. If I remember correctly, the proceeds should be reported on Schedule D, but the basis calculation can get tricky. You need to know total premiums paid into the policy minus any dividends received or withdrawals taken. Your relative should have received a 1099-SB form from their insurance company showing the basis information. If they didn't get that form, you should have them contact the insurance company ASAP to request it.

Keep in mind that the tax treatment may be different if your relative sold the policy because they were terminally ill or chronically ill. In those cases, some or all of the proceeds might be excludable from income. There should be a box checked on the 1099-LS if that applies.

My dad sold a life insurance policy last year and we had to deal with the 1099-LS too. One thing to watch out for - if the policy had any outstanding loans against it, those affect the basis calculation. The loan amount that was forgiven as part of the sale is treated differently than the rest of the proceeds.

I'm dealing with a similar situation helping my neighbor with their taxes. One thing I discovered is that you should also check if your relative received any accelerated death benefits while the policy was still active - those would have been reported on a 1099-LTC and could affect the basis calculation for the 1099-LS. Also, make sure to look at Box 1 vs Box 2 on the 1099-LS form carefully. Box 1 shows the gross proceeds, but Box 2 shows the amount that may be excludable from income (like if there were any qualified distributions). The taxable amount for Schedule D would be Box 1 minus Box 2. Given the $47,000 amount you mentioned, this could have a significant tax impact, so it might be worth having a tax professional review it before filing, especially since this is your first time dealing with this type of form.