Legal Question in Tax Law in Florida

Re: Did my mom use me for tax fraud? What can I do?

Well, this is certainly an interesting situation.

The first thing to note is that you do not owe tax on gains realized upon the sale of securities if they were not really your securities. The way you describe it, you would be deemed a mere "nominee." Indeed, you could have taken that position on the tax returns you say you just filed, and you may want to file amended returns reversing the inclusion of the securities sales in your income. If you did not buy the stock, did not control it, did not order the sales, and did not get the money from those sales, then in no sense were the gains your income.

Alternatively, if we assume that these were your investments, at the time your mother took the sales proceeds without your consent, you suffered a theft loss, which you can claim as an itemized deduction. This will produce a tax savings, though not enough to offset the inclusion of the income in the prior years with the penalties and interest that would have accrued.

Your CPA will probably be able to handle this, but don't just roll over and accept the idea that you have to pay tax on this just because your social security number was used. I've been through this same situation representing the ex-wife of a nationally known securities swindler who made thousands of trades in dozens of accounts using her social security number (and those of several other people). He is now in jail, and after much wailing and gnashing of teeth the IRS finally agreed that she was in no sense responsible for tax on the gains resulting from the trades made by her husband in her name but without her knowledge or consent.

Please contact me through my firm's website at www.bjhaynes.com if we can assist you.