Artist Tax Problems

Hello Ms. Walker,

Me and my husband are self-employed artists.

The question that I have for you doesn't really belong to the self employed category, though. Here it is: I have a trust that sends me 1099's. This year, the 1099B said that my proceeds from an exchange,(a trust merger) gave me a net proceed of 80,000.

When I plugged this number into TurboTax, there wasn't any spot for "exchange", so I listed it as a "sale": it said I would owe $5000! Did I do this right? Are exchanges "sales"? I'm just not sure if I'm doing this right, and, ironically, I don't have the money to pay an accountant. I'm an artist, I do my own taxes, I get $300 a month from the trust, and I made $0 in 2007 (I moved to Mexico, where I can live more cheaply). I

I know this is totally not what your site is about, so thank you for listening. It's hard in Mexico to find someone face to face who knows about US taxes. If you have any other site/person to send me to, please please do so! I've been trying to read as much as I can online to figure it out.

Best wishes from Baja California Sur


Hello Baja California,

Your dilemma is not unique to you. Many artists have tax questions about the non-indie part of life and don't have the resources to hire a tax pro.

Here's a little general tax info about income statements received at year end from different sources:

An employee must get a W-2.
A self-employed may receive a 1099-MISC.
An investor with interest or dividend income receives a 1099-INT or 1099 -DIV.
An investor who sells a stock or other product receives a 1099-B.
A partner in a partnership receives a K-1.
A trust beneficiary [one who receives money from the trust] receives a K-1.

Your first step should be to go the source. By the source I mean the accountant who prepares the trust tax return. Unless yours is an unusual situation, you should not be receiving 1099s from the trust. You should receive a K-1.

You don't say what kind of artist you are but for my purpose I'll think of you as an accomplished watercolorist. Just as putting a paintbrush into the hand of your neighbor doesn't make him a skilled painter, nor does putting you at the keyboard of TurboTax make you proficient or even skillful in taxes. Over and over in my writing I warn about the inexperienced using tax programs.

A 1099-B is sent when there is a sale. If you receive a 1099-B showing a sale of $2,000 you might have a gain or you might have a loss. If you bought the stock for $500 you would have a $1,500 gain. If you bought the stock for $3,000 you would have a $1,000 loss.

An exchange is just that, one thing is exchanged for another. In your case maybe one trust for another trust. For instance if a $50,000 trust is exchanged for a different $50,000 trust there is no gain nor loss. Thats's why you need to call whoever is handling the trust. If you get no help there call the IRS directly at 800.829-1040. [The # may differ when calling from Mexico. If it is, please let me know.] Don't be afraid of contacting the IRS. The new IRS is friendly and often helpful. Don't use a tax program for this situation.

Best,
June