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My daughter was a TV star and saved $1 million. If she buys a home and moves in with her boyfriend, will he have a claim?

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Dear Quentin,

My daughter was a TV starlet in her youth, and thanks to the magic of compound investing, has a large amount of cash on hand (approximately $1 million).

She wants to take some of this money and make the down payment on a co-op or a condominium. She and her boyfriend would then move in, and split the monthly expenses.


She wants to take some of this money and make the down payment on a co-op or a condominium. She and her boyfriend would then move in, and split the monthly expenses.

If she puts down the entire down payment, they move in, and then split up, I believe she should have clear claim to the asset(s) she brought into their arrangement.

However, if he contributed to any part of the mortgage payments, could he claim he contributed to the (increased) value of the property, asking for money if/when it is sold?

And if he were to directly pay her, would that be considered income for her? She would have to add that to her taxes, right? Seems like a huge amount of added paperwork!

They’ve been a couple for more than 3 years; she still hasn’t told him she’s rich; apparently, that is too embarrassing for her. I appreciate your input.

The Mother

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com

Dear Mother,

It’s worse to have important conversations about money for the first time during a marriage or, perish the thought, during the heat of a divorce — instead of during the courtship. The earlier this discussion happens about assets and expectations and income and contributions, the better.

If your daughter was a TV star and she’s browsing million-dollar listings — whether or not they have had many of the conversations they ought to have ahead of a property purchase — it’s safe to assume that her boyfriend knows more about her finances than she might believe.

Let’s say they live in California, a community property state: Anything they bring into the marriage, assuming they get hitched, they take with them in the event they divorce. Other community property states are Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

Your daughter could classify any payments her boyfriend makes as rent and, yes, she would declare that on her taxes. Again, the extra “paperwork” — filling in forms online — is small potatoes compared to the hassle of being audited. Put everything in writing, and keep finances separate.

If they did decide to marry, and your daughter’s boyfriend contributes to the mortgage directly and/or improvements to the house, the property would almost certainly then become a commingled asset, and convert from being separate property to marital/community property. She has been warned.

How much rent he pays in a house that she owns, I will leave for them to figure out.

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These money and investing tips can help you stay upright against the market’s headwinds

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Don’t miss these top money and investing features:

These money and investing stories, popular with MarketWatch readers over the past week, can give you greater knowledge about the financial markets’ current condition as you monitor your portfolio and plan ahead. Plus, check out several short videos about whether to include bitcoin and other cryptocurrency in your portfolio and how to go about it if you do.

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Opinion: I took advantage of the 2020 RMD rule but now my 1099-R looks wrong — what should I do?

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Q: I took advantage of the 2020 RMD rule and returned what I had taken from my IRA thinking there would be no taxes. I just got a 1099-R showing the full RMD. That can’t be right. How do I correct it?

—Pauline

A.: Pauline,

If the 1099-R is incorrect, you will need to contact the firm that issued the statement to get it corrected. However, the 1099-R is probably correct.

Read: Are there new RMD rules this year?

Under the law, the firm issuing the 1099-R has no responsibility for reporting how much of a distribution is taxable. That responsibility rests on your shoulders as a taxpayer. The issuing firm need only report what was paid out of the IRA on 1099-R.

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That does not mean you will pay any tax. Any funds returned to the IRA by Aug. 31, 2020 is considered a rollover and is not taxable. Normally, Required Minimum Distributions (RMD) are not eligible for rollover, but IRS guidance after enactment of the CARES Act that waived RMD for 2020 changed that. The guidance stated the normal 60-day time limit for rollovers would not apply and instead instituted a fixed deadline of Aug. 31, 2020 to return such distributions and avoid taxation.

Read: It’s not too late to save on your 2020 tax bill — here’s how

I get similar questions about 1099-Rs every year. The reporting of the gross distribution looks like an error but in most cases, it is correct and the person receiving it simply hasn’t learned how it is accounted for yet.

Here’s how the accounting typically works.

As with any gross amount reported on Form 1099-R, you declare the amount that is not taxable when you file your 2020 tax return. What I hear most tax preparers would do in your situation is put the gross distribution amount from 1099-R on line 4a as per the normal procedure. Then, they would place a zero in 4b of your Form 1040, and put a note on the return near those lines that it was “returned to the IRA under the CARES Act,” “CARES Act rollover,” “CARES Act,” or simply “Rollover.”

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If you did not return all of distribution by the deadline, the portion that was not returned would be taxable. You would put that number on line 4b.

Read: 5 things to do if you inherit a Roth IRA

As I mentioned a moment ago, the discrepancy between the gross distribution reported and what should actually be taxable comes up in other situations. Three of the most common are other rollovers, Qualified Charitable Distributions (QCD), and distributions from accounts that had received after-tax contributions.

In all those cases, the reporting process looks like what I described above. You put the gross distribution on line 4a and the taxable portion on Line 4b. Then note why the numbers are different with “rollover,” “QCD,” or “See Form 8606” on the 1040. Form 8606 is the form used to determine the taxable amount of an IRA distribution when nondeductible contributions have been made to any of one’s IRA accounts.

If you have a question for Dan, please email him with ‘MarketWatch Q&A’ on the subject line.

Dan Moisand’s comments are for informational purposes only and are not a substitute for personalized advice. Consult your adviser about what is best for you. Some questions are edited for brevity.



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Video: Why Mike Novogratz sees bitcoin reaching $500,000 by 2024

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Galaxy Digital’s Mike Novogratz explains the outlook for crypto as Coinbase goes public.





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