Cost Basis_1

Post on: 12 Июнь, 2015 No Comment

Cost Basis_1

11. Who’s responsible for reporting cost basis, gains and losses to the IRS?

Taxpayers are required to report the sale of capital assets on their Form 1040 individual income tax returns using Schedule D. Financial institutions provide some help by reporting the transaction to both investors and to the IRS.

Before 2011, financial institutions have only been required to report the proceeds of investment sales — not the actual gain or loss. Under new federal rules your fund company or broker will report to the IRS gains and losses realized from the sale of:

  • Individual stocks purchased after Jan. 1, 2011
  • Mutual fund shares purchased after Jan. 1, 2012
  • Bonds, options and other securities purchased after Jan. 1, 2013

Collectively, investments acquired after the above dates are called covered securities, because they are covered by the new regulations. It’s important to note that investors will still be solely responsible for calculating and reporting gains and losses realized on the sale of non-covered securities — those acquired before the above dates.

12. How will my gain/loss be reported?

Cost Basis_1

You will receive a Form 1099-B showing sales proceeds for each closing sale transaction. Basis information will be reported along with the calculated gain or loss on the trade. The gain or loss will be classified on the form as short-term or long-term based on the acquisition date of the security. The information reported to you on Form 1099-B will also be reported to the IRS.

13. When do I have to submit an election form?

You will need to have your election form submitted before January 1, 2012. If you have not provided your election by then, the funds default method will apply to your account.

14. What is my cost basis for an investment I received as a gift?

If the donor’s basis is less than the value of the gift at the time the gift is made, you generally must use the donor’s basis. If it isn’t, you would use the following:

  • The donor’s basis if it’s greater than the sales price.
  • The fair market value on the date of the gift if it’s greater than the sales price.

You’re considered to have neither a gain nor a loss if the sales proceeds are greater than the fair market value on the date of the gift and less than the donor’s basis.

15. Can my broker make my election for me?

The broker who is the registered representative of record may provide the election over the phone. However an election of average cost must be made in writing.


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