2011 1099-B - basis question & basis substantiation

[FEDUKE404]

Digging for the facts

I think I saw for the first time a 1099-B or somewhere in the year end consolidated brokerage statement, an area called "Accured interest" due to a individual Corp bond purchased in 2010. In the past the TP had to dig up his purchase confirm. How convenient.

I'm not sure I've yet seen "accrued interest" on a Form 1099-B, but I have seen that information listed for years on statements the client receives (usually "year-end" or "additional information" type summaries). Investment firms are generally quite good about providing that information which more directly, in most cases, affects Sch B and/or Forms 1099-INT.

I ALWAYS ask for that additional information from any client with an active investment account.

FE

[AZ-Tax]

Accured interest on 1099-B

I think I saw for the first time a 1099-B or somewhere in the year end consolidated brokerage statement, an area called "Accured interest" due to a individual Corp bond purchased in 2010. In the past the TP had to dig up his purchase confirm. How convenient.

[Nashville]

Other Methods

There can be differences due to various methods of valuation for multiple purchases of the same stock...LIFO, moving average, etc. The key is good records of purchases, DRIPs, etc. and keeping them in case of audits, or in cases where the basis is different than what is reported beginning in 2011. These other methods ARE allowed so long as the taxpayer is consistent.

On a practical note, I would emphasize that if a client wishes to report basis of sales by these alternate methods, this is an open invitation to a letter from IRS. Even though the taxpayer may ultimately prevail if he has good records, the question becomes whether the this is worth the consternation resulting from having to involve the IRS correspondence AUR group every time a security is sold.

[connors]

Has anyone seen anything noting what happens in 2011 & beyond if a taxpayer doesn't agree with the basis reported on the 1099-B? Is there a requirement for the taxpayer to supply basis if it's not a covered security?

I guess my actual question should be: Is there a form to submit if a taxpayer disagrees with the new 1099-B for 2011?

I realize it doesn't apply for 2010 returns but want to make sure I haven't missed anything issued to date.

Also on a somewhat related issue, does anyone have any experience on what backup is needed to substantiate a purchase of a security (grandfathered from the above new 1099-B reporting requirements) if the sale is audited? Is the transaction schedule from the broker good enough if it notes the name, settle date of the purchase, shares, & cost or is the actual confirmation needed, which also shows the cusip & trade date?

Thanks for any guidance.