need some tax help - capital gains

[Modas]

Hi Guys -

My wife just recieved an IRS notice that she owes about 8500 in taxes from a stock sale that she did back in 2006.  She has the stock thru our bank.  When she sold the stock, she immediately reinvested it into different funds, so she didn't actually get any money.  Basically just switched to a different stock fund since the one she was in wasn't doing well.

So, we called the IRS, and it turns out she needs to submit a form 1120/Schedule D and then supposedly everything will be right with the world.

I went to the IRS site, found the 2006 Schedule D (capital gains/losses form) and the instructions, but for the life of me don't have a clue how to fill this thing out.  These are long term assests, so I'm filling out part II of the form, but what I don't understand is where do I show that she took the money and immediately reinvested it?  Is there another form that I'm missing that I would use to show the purchase of the new stocks?

Course we can't get any professional help now, since all the CPA's/tax guys are booked up and they only gave about 3 1/2 weeks to straighten this out.  Any help is greatly appreciated!!

[wrongwayric]

Ask your bank or whoever handled the stock swap for you. Sounds to me like they might need to give you some type of form or receipt that says no money was ever put into your hands, that it was all a paperwork shuffle. Wouldn't surprise me if the bank might not be able to fill that form out for you.

[Maverick]

Just because you reinvested the money into a new fund does not absolve you from capital gains issues. If this was not a 401k rollover and if you withdrew the funds from the original tax deferred account you may still be liable for any and all gains from it. Nothing says you have to get the money in your hands before it's taxable.

I think you really should spend a few $ and get some tax help on this issue from a real CPA not a part time tax form prep person. They will be able to tell you if the fund was tax deferred and if it qualifies for a no tax rollover to a qualified tax deferred fund