Cost Basis Reporting
Cost Basis Tracking by Transfer Agents
The way that the IRS tax rules are written, many types of companies are required to track Cost Basis information. The IRS will compare and match the companies’ reported numbers with investors’ returns. Penalties can be imposed on companies found to be misreporting cost basis.
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Transfer Agents (including Self Issuer TA’s) are, in some cases, required to request cost basis information and record it for covered securities – those that were acquired on or after January 1, 2011 and those for which Cost Basis information is received.
TA’s are required to track whether a transfer is a gift, transfer to the same shareholder (whether the same registration or not), sale, or inheritance (and default to gift treatment if this information isn’t available.) Gift date, date of death for inheritance and sale dates need to be tracked. The TA needs to get instructions on which lots are to be sold – whether based on FIFO or specific identification of lots at the time of the stock transfer. Cost Basis Statements with the appropriate Cost Basis information needs to be provided to brokers if shares are subsequently transferred to a Street Name account under a Broker Name or as CEDE & CO.
StockTrack shareholder accounting software can help you track cost basis and meet your cost basis requirements.