Putnam Fair Fund

[MargaretMort]

New problem, of course. Client received a check for $17.40 from the Putnam Investments Distribution Fund--apparently the SEC found Putnam guilty of something to do with mutual fund market timing activity and each client was awarded money based on whatever formula was set up. That part is immaterial to the question--just some background.

Client did not receive a 1099 but, being an honest man, brought the paperwork he received with the check. Of the $17.40, $7.29 represents share of advisory fees and may be taxable income. $0.53 of the total represents his share of post-judgment interest which is taxable interest income. the remainder represents his share of losses due to market timing activity.

I went back in my records and found that he sold his Putnam shares in 2005 at a loss. I could, as I did in my own return, show this as a short term gain, show it on line 21, I could ignore it, especially given there is no 1099. To be perfectly honest, I should add $1 to his interest income, $7 on line 21 and the remainder, $9, on a Sch D.

What say you?

Many thanks for any and all comments. MM

[JohnH]

I'd put the $1 on Schedule B and $16 on a Schedule D with zero basis and force it to report as short-term gain. Then move on to the next return. That's what I do with most of these cheesy settlements, including one I received personally in 2008 and 2009 installments. And, as Jerry Mealer used to say, I leave it at that "even if I never see the back of my neck again."

[AnnieR]

I have one of those to do, but also had one from Deutsche Investment Management Americas, Inc. Settlement. It was for considerably more than the Putnam ones I've seen and put on hold until I could find out how to handle it. I called the phone # at the bottom of the receipt from the check (Fund Administrator). My client gave me permission to call...(yes, signed) and the person I talked to told me how to handle it...the account it was to go in was closed and she would NOT be getting a 1099 because it was not taxable.

AnnieR

Edited February 19, 2010 by AnnieR

[MargaretMort]

Thanks for the help. MM

[Lion EA]

I've put small amounts like that on D for ST as easier to track all the pieces and explain to the client where it is, and the bottom line tax comes out the same from ST gain as from interest or other income. I had one myself that was actually my IRA, but my broker and hence my IRA had moved, meaning I needed to send the check back to the fund to be rewritten. It was less than $10, so I put it in my personal checking account. Obviously, I will not receive a 1099-R. I think I'll put it on line 21. Make sense?