An Oakland Calfornia based Tax Return Preparation Firm - Company Message
Tax Tips

Cost Basis .. stock transactions

Starting January 1, the brokers will now have to report your cost basis when you sell a stock or other financial instrument.

This can be good as it helps keep down the record keeping mess that many have with stock.

However, the brokers only have info for the last few year soyou will still need to be able to provide that. 

You should check your broker's statement for errors. When they first started reporting qualified dividends they got very messed up and that resulted in corrected 1099's and who knows for sure that they were correct.

I suggest you review your cost basis report that you should be getting from your broker at the end of each quarter, just to make sure you agree that it is correct.

My broker is Schwab and they do a good job with this.

Following is a brief writeup from their site about cost basis.

"What is cost basis? And why does it matter?

Quite simply, cost basis is the original purchase price you paid for an investment plus commissions and any fees. Adjusted cost basis includes any other
other adjustments

Adjustments to cost basis

Adjusted cost basis includes any adjustments due to wash sales, amortization, accretion, and corporate actions.to the price.

Sale Proceeds–Adjusted Cost Basis=Gain or Loss

  • Proceeds from selling an investment after deducting costs like commissions and fees.
  • The original purchase price for an investment plus any fees, commissions, or other adjustments Adjustments to cost basisAdjusted cost basis includes any adjustments due to wash sales, amortization, accretion, and corporate actions..
  • Gains and losses must be reported at tax time.

Shares sold          100 
Shares bought      100 
Price/share       X  $20 
Price/share       X  $17 
Gross proceeds $2,000 
Cost basis        $1,700 
Commission      –   $20 
Commission      +   $20 

Sale Proceeds          $1,980
–Adjusted Cost Basis         $1,720

                                                $260  Gain

How will cost basis reporting change?  
  • As new reporting requirements phase in, Schwab will report your cost basis as well as gains and losses to you and the IRS on your Form 1099-B for covered investments. Covered investmentsCovered securities are those acquired on or after these dates: Equities: January 1, 2011 Mutual Funds, ETFs, DRIPs: January 1, 2012 Other Securities: January 1, 2013 .
  • Newly formatted Form 1099-Bs will be available in the first quarter of 2012.
  • You’ll continue to be responsible for submitting cost basis information to the IRS on Schedule D of your annual tax returns for both covered and uncovered securities."

Website Builder provided by  Vistaprint