Years ago I was gifted stock. I distinctly remember giving the basis info to my broker and seeing it show up in my account. But now it shows $0 and the broker says they never got the information.
Assuming I cannot recover the information, what do I do when I sell the stock?! The stock must have been bought between 1993 and 2014, but there seems to be no way to narrow that down.
(It had a somewhat happy ending; I found an old email documenting they had the info. They dug harder and found it. But it was exceptional luck that I had the old email; without that they wouldn't have done anything.)
The broker has no obligation to assume that any information you send them is accurate. It is your responsibility to maintain accurate records to document your cost basis. Even in the current regime where brokers are required to track basis on covered securities, they are only required to accept the basis recorded by other brokers and/or specified holders of security information.
Specifically to your question, if you couldn't document an actual basis, you would be required to use $0 cost basis.
Obviously they can't be required to verify information they are given, but if they are given information, don't they have an obligation to not lose it; as they lost mine? Of course it is problematic how I could demonstrate I gave them the information if I don't have it, and if I have it their losing it is unimportant. But still...
As a practical matter, does the IRS ever challenge the basis as long as it is not conspicuously suspicious or the rest of the return is unchallenged?
You are missing the point on who is responsible for properly documenting the cost basis of your stock when you sell. The simple answer is you and only you. If you gave cost basis documentation to your broker without retaining a copy, you created a problem for yourself.
After you sell, your broker should eventually send you a 1099-B that shows the proceeds of the sale and may or may not show an estimate of your cost basis. They will report a cost basis estimate to the IRS only if they believe the stock was acquired on or after January 1, 2011 and they can make a good faith estimate as to the cost basis.
In your case, it appears you can't show whether the stock was acquired before or after January 1, 2011 ("The stock must have been bought between 1993 and 2014") so your broker can't do much other than classify the acquisition date as unknown. It would also be reasonable for the broker to conclude documentation that asserted a cost basis without an acquisition date was too inadequate to use for their cost basis estimate.
When you sell I expect your broker would correctly report the proceeds of the sales to the IRS and not a cost basis. The 1099-B you receive should categorize this transaction under the category of: "Long-term transactions reported on Form(s) 1099-B showing basis wasn?t reported to the IRS"
The cost basis reported on your tax return will be entirely up to you and entirely your responsibility.
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