About Capital Gains

I just got an email from my broker that starting in 2011, in addition to reporting all our securities sales, they'll also have to report the actual capital gains. My broker's default will be first-in/first-out, but we can arrange for a number of alternatives (i.e., based on the IRS "specified lot" option, or whatever it's called). I'll probably call tomorrow to ask them to set up "most expensive" first as my option.

The most unfair part of the tax system is that for those of us who work for an honest employer and who keep our accounts in banks and security broker accounts, the IRS can tell us what our our income is, including the detailed interest, dividend, and capital gains numbers on schedules B and D, and with just a little more information, the "taxes paid" section of schedule A, while those whose income is "cash" can easily get away without paying all that they're required to.

Reply to
Stan K
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It's called the "tax gap", every so often some legislation comes along trying to narrow it. For example, the unpopular rules regarding increased 1099-MISC reporting requirements that are coming up soon.

-Mark Bole

Reply to
Mark Bole

I'd very carefully review all 1099-Bs and related information. There are various situations where the brokerage may not have the correct figure, (i.e. the correct adjusted cost basis) especially if the securities were transferred from another brokerage without cost basis, if the securities were inherited, if the securities were deposited into the account by the owner either in certificate or bearer form, if the (taxable) bond was bought above par and the premium is amortized, etc. If your figures differ and you can document them, then I'd use those on the Schedule D. There are three ways you can use to determine adjusted cost basis: FIFO, specified lots, and for funds average cost basis. When I sell partial lots of funds or stocks, I always specify in writing which shares to sell.

Reply to
Green Eggs & Spam

The broker isn't required to keep (or attempt to find out) your basis for pre-2011 purchases.

Reply to
Don Priebe

| I'd very carefully review all 1099-Bs and related information. There are | various situations where the brokerage may not have the correct figure, | (i.e. the correct adjusted cost basis) especially if the securities were | transferred from another brokerage without cost basis, if the securities | were inherited, if the securities were deposited into the account by the | owner either in certificate or bearer form, if the (taxable) bond was bought | above par and the premium is amortized, etc. If your figures differ and you | can document them, then I'd use those on the Schedule D.

Speaking of this... Fidelity ignores(*) de minimis OID for tax-exempt bonds, converting what would have been tax-free interest into taxable capital gain. Is this actually required or is it an election?

(*) They don't completely ignore it in the sense that they use it for determining market-discount income (which would be taxed at ordinary rates) and whether market-discount itself is de minimis, so it isn't all bad.

Dan Lanciani ddl@danlan.*com

Reply to
Dan Lanciani

The ObamaCare bill has a provision that 1099-MISC must be issued even if you buy goods/services from a corporation (under current law you have to issue it only when you buy goods/services from an individual contractor). This ought to help the IRS match the receipts claimed by one company to the deductions claimed by another. The law goes into effect in 2012.

If I'm not mistaken, a bill was passed in the last month that makes the requirement for landlords. I think it was the small business jobs bill.

Whether the IRS will enforce this is another thing. They don't appear to always enforce it for individual contractors.

The laws, while well meaning, put a burden on the 95% of people who are honest.

And one more: if you own money in foreign accounts, then the IRS won't get this statement of profit.

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