1099-b

[Kram BergGold]

Mutual fund 1099-B has box 6 checked as non covered. There is no box 6b. The basis is shown on the 1099 but it is wrong. My assumption is basis is not reported to IRS so can just enter the correct basis as opposed to reporting the incorrect basis and adjusting it. Agree or disagree?

[FEDUKE404]

Non-covered with cost basis shown?

Mutual fund 1099-B has box 6 checked as non covered. There is no box 6b. The basis is shown on the 1099 but it is wrong. My assumption is basis is not reported to IRS so can just enter the correct basis as opposed to reporting the incorrect basis and adjusting it. Agree or disagree?

At least from experience with paperwork from last tax season, just about every commercial broker reports things to the client differently. You have to deal with everything from their coding for "reported" to "not reported" to include such goodies as following the logic of NOT "not reported."

If the statement says, in words, "non-covered," that pretty well means the cost basis was NOT reported to the IRS for that specific sale. You are somewhat contradicting yourself when you say the Form 1099-B shows "non-covered" but that it ALSO shows a cost basis. Those two would be mutually exclusive. Are you sure that specific basis is not on the actual tax document but rather on the client's annual gain/loss summary?

As for basis being "wrong" that will depend upon records your client maintains, especially when mutual funds are involved. If there were any prior sales in the account, FIFO may raise its head. Also don't overlook the possibility of things such as returns of capital (changes basis) and spin-offs/reorganizations along the way.

The stockbroker is pretty much stuck with GIGO, but especially with fairly recent (within past decade) purchases/sales their records should be fairly accurate.

Bottom line: I would at least try to rationalize the difference between the (unreported) basis and the client cost basis records. That action could easily benefit all later down the line whenever the "covered" things are sold.

Sorry I can't be of more help, but so far I have not seen any brokerage tax statements (including my own!) for calendar year 2012.

FE

[DonPriebe]

Vanguard Statement

I have my Vanguard 1099-B for 2012. It came all by itself, not in the year end statement package. It is labeled "2012 Form 1099-B"

My form has the sales listed under three different categories: (bolding in the original)

. Short-term transactions for which basis is reported to the IRS - Report on Form 8949, Part I, with Box A checked
. Short-term transactions for which basis is not reported to the IRS - Report on Form 8949, Part I, with Box B checked
. Long-term transactions for which basis is not reported to the IRS - Report on Form 8949, Part II, with Box B checked

There is also a column (box 6) with the seemingly mutually exclusive choices of "a - Noncovered security" and "b - Basis reported to IRS". However, in all cases, a basis for each transaction is shown on the 1099-B.

I consider this a model of clarity, and except for the fact that there are no subtotals by category, very easy to enter.

[FEDUKE404]

Positive step for 1099-B reporting

I have my Vanguard 1099-B for 2012. It came all by itself, not in the year end statement package. It is labeled "2012 Form 1099-B"

My form has the sales listed under three different categories: (bolding in the original)

. Short-term transactions for which basis is reported to the IRS - Report on Form 8949, Part I, with Box A checked
. Short-term transactions for which basis is not reported to the IRS - Report on Form 8949, Part I, with Box B checked
. Long-term transactions for which basis is not reported to the IRS - Report on Form 8949, Part II, with Box B checked

There is also a column (box 6) with the seemingly mutually exclusive choices of "a - Noncovered security" and "b - Basis reported to IRS". However, in all cases, a basis for each transaction is shown on the 1099-B.

I consider this a model of clarity, and except for the fact that there are no subtotals by category, very easy to enter.

That seems to be a positive step on the part of Vanguard, especially as related to the Box "A" or Box "B" categories and the "tax instructions" as shown. Caveat: The item you received may still be some kind of combination of actual Form 1099-B with a year-end activity statement, especially for column 6 issues. A good way to check that is to see if the totals match, e.g. a very small (let's say $8.75 cash in lieu payment for the mandatory "sale" of a fractional share in a spin-off event) may NOT be included in the Form 1099-B amounts, but would show up as a "sale" in a companion/supporting statement.

I still see a potential issue with the cost basis. For the stuff with a reported to the IRS basis ( which means reasonably new purchases ), those numbers should be extremely accurate. For the stuff without a reported to the IRS basis, those numbers might at least be worth some discussion with the client. This would be especially true for any older stocks. Comsider the GIGO theory!

Most of my investments are now with Scottrade. They track all "new" purchases. As for the older stuff, it is pretty much my responsibility to tell them what the cost basis was. (Yeah, I even owned Ma Bell way back when.) With their separate gain/loss tracking system, they will show (via warning flag) any stocks for which the cost basis is "incomplete." When I have spare time I will go through my records and enter the old cost basis information there. It is not a high priority activity for me, especially during tax season. And, of course, for any sales of those stocks the cost basis would NOT be reported to the IRS anyway, regardless of any cost basis information (accurate or inaccurate) rattling around within their computer.

But I DO like the positive direction in reporting by Vanguard which you have provided us. Hopefully all of the major investment firms have improved their 1099-Bs since last year!!

FE