client has a investment family trust with capital gains

[TRPTori]

I have one of my husband's clients that is now my client that has several investment accounts, one of which had a significant capital gain. For some background info; my husband started this business about 30 yrs ago. I began helping him about 13 yrs ago, admittedly, he was a terrible teacher, preferring to just do it himself instead of teaching me the more complicated things. He recently passed away in the middle of tax season this year, before he could teach me more. So I've been researching and reading every tax book I can get my hands on to fill in the gaps, just to get me through this year, but I can't find an answer to this.

I filled out the sch D, as well as filling out the 8949 adding in the short and long term, including the investment fees as I was taught. I have attempted to call the IRS for clarification every day for the last 3 weeks and get the same recorded message: "due to extreme call volume, there are no agents available for your call, please try again on the next business day". To my knowledge, I have filled out everything correctly. The client is literally screaming at me, as due to the family trust having a capital gain of over 113k, they owe over 11k. He states that I did everything wrong and that he was told he would never owe taxes on that. So my question is, am I missing a form? Is there more I was supposed to do?

[abctax55]

1) Calling the IRS is a waste of time.  Unless you can get them to "put their advice in writing" what *they* tell you is worthless.

2) Clients are often wrong when it comes to having to pay taxes.

Is this income being reported on a trust return, and the gains flowing out on a K-1 to the individual?  

And condolences on your loss.

[Just-Lisa-Now-]

Can you show him and make him acknowledge that there are gains on the 1099B?

Someone will pay taxes on the capital gains, either the trust or the beneficiaries, depending on the trust document.

[abctax55]

And if those gains are in the trust - that's one of the highest tax brackets.

I'm curious if this really is a 'trust'.

NMI

[sjrcpa]

"I'm curious if this really is a 'trust'."

Could be a Grantor Trust.

@TRPTori  Is your client's SSN on the 1099? Or is it an EIN?

For trusts, you should always obtain the Trust Document and read it to determine what you are dealing with.

"I filled out the sch D, as well as filling out the 8949 adding in the short and long term, including the investment fees as I was taught."

Investment fees cannot reduce the Capital Gains. IRS threw that out years ago. They are a 2% of AGI miscellaneous itemized deduction, which is not an allowable itemized deduction currently.

[BobKamman]

My clients pay me for being honest, even if it hurts their feelings.  If a brain surgeon dies, his wife doesn't qualify to take over the operation even if she may have been a nurse in the operating room.  It is always best to decline work that is above your level of expertise.  Schedule D is not a complicated form, nor is Schedule A (where investment expenses, as @sjrcpa points out, haven't been allowed since 2017).  

[IRonMaN]

"The client is literally screaming at me"

Life is too short to take abuse like that.  They have income and as noted above, someone is going to have to pay some tax on the gain.  The last client that acted like that with me because of a sizable tax due, became a former client once I hung up the phone.  

Trying to use a softer approach than Bob's I will add a simple suggestion.  Stick to what you do well and leave things you aren't comfortable with to other preparers.  Years ago I decided there were some areas that I wasn't going to mess with so to this day I have no problem telling clients or potential clients thanks, but no thanks.

[abctax55]

Susan, I forgot about grantor trusts.....  *not* my area of expertise.   Obviously 😉

And that missing info of "whose name, ID number is on the F 1099-Int/Div/B is important.

Also, this sounds like a client your husband had been previously doing.  How was it handled in prior years (not that it would necessarily make it right) ?

As Jeff says, clients don't get to yell at me - they immediately become former clients.