Question
Where do I report nominee distribution that was made on a 1099-S Received?
I have a client (person A) who received a 1099-S for proceeds on a property he sold in a 1031 Exchange. He had another investor (person B) in the property who did not receive his share of the 1099-S. Person A paid Person B 1/3 of the proceeds (what he was entitled to) and issued a 1099-Misc for the Nominee Distribution. So far so good.
When I prepared the return, I showed the proceeds paid to Person B as a Nominee Distribution on Person A's return. This resulted in a negative amount on Line 13 of Schedule D. When the return was filed, the return was rejected.
The question I have is if there is a better way to enter this payment. If not, then Person A will have to file a paper return. Am I correct here?
