What info is necessary on a Scheule C?

Call up Fidelity and request the information you need. Many brokers make available CSV files with infomation that can be imported in Excel and formatted rather quickly in a maner suitable for attachment to Federal and State Returns. Many also provide year end investment reports with the information needed in the format required.

No, IRS is looking to tie in gross proceeds which is the number reported to them.

I meant to say "Schedule D", not C.

Nope. The IRS gets the total sale details. If it doesn't match what you claim, you are raising a very fast red flag. It's cost that brokers don't all track yet that you are resposible to track on your own. If I worked for the IRS, I'd suggest that brokers have to tack the purchase price along with number of shares bought, and transfered shares have to have this info follow. Just my two cents on that. JOE

Fidelity is required to report the net proceeds (sales price) to the IRS and you. If they also report the net gain on your own records, you can calculate the cost basis as proceeds minus gain.

This is schedule D though.

[...]

This would mean reporting to the IRS every stock, bond, and mutual fund purchase you ever make, including DRIP's, at time of purchase or transfer. Given current reporting requirements, this would be perhaps double, triple, or more than that in terms of transaction volume?

Then, there's the issue of purchases in retirement accounts vs. after-tax accounts....for starters.

-Mark Bole

Well, I was thinking a bit differently, of course. If the broker is reporting sale proceeds, it seemed logical that reporting cost would improve collections. I'd imagine there's a lot of tax fraud in overreporting cost basis, it would seem an easy thing to cheat there. Would the cost really exceed the benefit? JOE

Not to mention the psychological/political factor of the gummint having that much information on hand about everyone.

Actually, the payors already do this analysis. That's why you don't get

1099-DIV/INT/B statements for retirement accounts.

Not only cheating, but also the countless people who don't track basis and just guess when they find out they should have.

I suspect that at a minimum we'll wind up with the broker reporting basis of shares both bought and sold through the same broker.

I went on line and found a report that had the sale price totals broken down by long and short term, so that was pretty much what I needed. Thing is, the gain wasn't the same as that reported on my paper 1099. I called to ask customer service about it; they looked it up and found their system had a third value for gain! So, I have no idea what they reported to the IRS; the number on my 1099, the number on the online 1099, or customer service's 1099. Hopefully they will sort it out before 4/15. The dividend and interest figures were consistant; that is something.

Many brokers and mutual funds already report this information to the customer, so it shouldn't be hard for them to report it to the IRS as well.

There are cases where the broker doesn't know the cost basis, because they didn't perform the original purchase: transfers from other brokers, gifts, shares that the customer kept in a safe deposit box, etc. But when they know it, how hard would it be for them to include it on the

1099-B? They could require that transfers include the cost basis, as you suggest, but all old transfers would have to be grandfathered.

[...] | > Well, I was thinking a bit differently, of course. If the broker is | > reporting sale proceeds, it seemed logical that reporting cost would | > improve collections. I'd imagine there's a lot of tax fraud in | > overreporting cost basis, it would seem an easy thing to cheat there. | > Would the cost really exceed the benefit? | > JOE | | Many brokers and mutual funds already report this information to the | customer, so it shouldn't be hard for them to report it to the IRS as | well.

Fidelity appears to report the basis as the cost adjusted _down_ as required by law (e.g., muni bond premium amortization) but not adjusted _up_ as permitted for, e.g., accrued OID. Of course, they do not show their work.

| There are cases where the broker doesn't know the cost basis, because | they didn't perform the original purchase: transfers from other brokers, | gifts, shares that the customer kept in a safe deposit box, etc. But | when they know it, how hard would it be for them to include it on the | 1099-B? They could require that transfers include the cost basis, as | you suggest, but all old transfers would have to be grandfathered.

If this were to be implemented I would hope that the brokerage would be required to compute the basis using the elections most favorable to the owner. I would also hope that they would have to show their work. I expect my hopes would be dashed...

Dan Lanciani ddl@danlan.*com

Yes, but who wouldn't want that additional information? ;-)

I suspect that for all the taxpayers who have over-reported basis, there have been others who, not knowing better, paid a tax that was not owed, when they got a computer letter from the IRS regarding an unreported 1099-B. Mandatory purchase reporting might reduce this type of tax revenue.

Beyond DRIP's, there are also the added reporting requirements for employee stock purchase plans. Someone will need to bear the cost of enhancing the systems of those brokerages which do not currently support tax basis reporting. For every sale, there are often multiple purchases, further split into long-term and short-term.

While a given brokerage should be able to track basis for its own customers, let's hope they won't be responsible for the entire history of a capital asset from initial purchase! Perhaps a type of "rollover" statement when a customer departs would go a long way (Form 8606 on steroids?).

Databases can generate data, fast -- commercial services that "reverse engineer" purchase transactions for common stock transactions back to Day 1, will generate many rows of data for possible inclusion on Schedule D.

While we're at it, why not clean up that darned pension reporting, too! I've always found the "taxable amount not determined" box to be particularly pesky...

-Mark Bole