Splitting Investment Income on Tax Returns

When a joint investment account is divided, the financial institute will use only one Social Security number to report the earnings and thus only one 1099 will be issued for that account. For example, following their divorce, Dick and Jane divided their joint investment account and transferred their own share into an individual investment account solely in their own name, on November 1^st. If the “primary” Social Security number on the joint account is Dick’s, he will receive one 1099 for the joint account earnings earned from January 1^st– October 31^st and a second 1099 for the individual account earnings earned on his individual account from November 1^st – December 31^st. And, Jane will receive only one 1099 for the individual account earnings earned on her individual account from November 1^st – December 31^st. If the goal is to share the tax liability for the joint investment account earnings, this can be accomplished in a few ways.

• The tax liability is projected during the divorce process and an adjustment is worked into the property division.
• The spouse who received the 1099 adds the investment income to their tax return and language is added to the decree outlining the agreement on how to share the tax liability at tax filing time.
• The spouse who received the 1099 can “nominee”the correct portion of investment income to the other spouse by filing a 1099 and 1096 with the IRS and furnishing a 1099 to the other spouse.