CAPITAL GAIN OR LOSS PUB 4012 TAB d Pages D-36 to D-43

SALE OF ASSETS ---SCHEDULE D Key elements of sale When was it bought? When was it sold? What is the sale price? What is the cost basis? Adjustments to basis? Should receive form 1099 B from investment company/brokerage house

BROKER STATEMENT

BROKER REQUIREMENTS AS OF 2011 Broker must report whether a gain or loss is short term or long term on Form 1099-B unless the securities sold were non-covered securities Broker must report cost or other basis on Form 1099-B unless securities sold were non-covered securities

NON-COVERED SECURITIES A security other than stock Stock purchased before 2011 Stock acquired before 2012 in a regulated investment company for which the average basis method is available Stock acquired before 2012 in connection with a dividend reinvestment plan

SALE OF PROPERTY Holding Period---Short term or long term Gain or loss Short term is one year or less Gain or loss Sale price minus Cost basis Six possible situations for Short term and basis reported =‘A’ Short term and basis not reported =‘B’ Short term and no 1099 B provided =‘C’ Long term and basis reported =‘D’ Long term and basis not reported =‘E’ Long term and no 1099 B provided =‘F’

SALE OF PROPERTY PROCEDURES To enter into TaxSlayer, select “Income” on top, then select “Capital Gain and Losses (Schedule D)”, then select “Capital Gains and Loss Items”

CAPITAL GAIN AND LOSS Select this

CAPITAL GAIN AND LOSS (SCHEDULE D) Select this

SALE OF PROPERTY PROCEDURES To enter into TaxSlayer, select “Income” on top, then select “Capital Gain and Losses (Schedule D)”, then select “Capital Gains and Loss Items” Enter Brokerage Name in “Description of Property” Enter “Date Acquired” from 1099 B Enter “Date Sold” from 1099 B Enter “Sales Price” from 1099 B

CAPITAL GAIN AND LOSS ITEMS Brokerage name Date Acquired Date Sold Sale Price

SALE OF PROPERTY Select “Cost Basis Type” (from 1099-B Line 3) To enter into TaxSlayer, select “Income” on top, then select “Capital Gain and Losses (Schedule D)”, then select “Capital Gains and Loss Items” Enter Brokerage Name in “Description of Property” Enter “Date Acquired” from 1099 B Enter “Date Sold” from 1099 B Enter “Sales Price” from 1099 B Select “Cost Basis Type” (from 1099-B Line 3) Basis reported Basis not reported 1099 B not provided Enter “Cost”

COST BASIS OF PROPERTY Basis of stock Adjusted Basis In order to compute gain or loss on a sale, tax payers must provide their basis in the property sold. The basis of property is usually its cost. Adjusted Basis An adjustment to basis may include additional commissions or fees paid to the broker at the time of purchase or sale. Events after the purchase of stock (such as SPLITS, REVERSE SPLITS or STOCK DIVIDENDS) Require adjustments (decreases or increases) to the per share basis of stock.

COST BASIS OF PROPERTY Property Received as a Gift Determination of the Basis is OOS Reinvested stock dividends, DRIPS and Mutual fund shares Require adjustments (generally increases) to the basis of the original investment If taxpayers cannot provide their basis in an investment, the IRS will deem it to be zero.

CAPITAL GAIN AND LOSS ITEMS Cost basis type Cost

SALE OF PROPERTY Enter any adjustment as needed To enter into TaxSlayer, select “Income” on top, then select “Capital Gain and Losses (Schedule D)”, then select “Capital Gains and Loss Items” Enter Brokerage Name in “Description of Property” Enter “Date Acquired” from 1099 B Enter “Date Sold” from 1099 B Enter “Sales Price” from 1099 B Select “Cost Basis Type” (from 1099-B Line 3) Basis reported Basis not reported 1099 B not provided Enter “Cost” Enter any adjustment as needed Wash sales, main home exclusion, reported cost basis adjustments, etc. (D-39 and 40)

CAPITAL GAIN AND LOSS ITEMS Adjustment amount Adjustment type

SALE OF PROPERTY To enter into TaxSlayer, select “Income” on top, then select “Capital Gain and Losses (Schedule D)”, then select “Capital Gains and Loss Items” Enter Brokerage Name in “Description of Property” Enter “Date Acquired” from 1099 B Enter “Date Sold” from 1099 B Enter “Sales Price” from 1099 B Select “Cost Basis Type” (from 1099-B Line 3) Basis reported Basis not reported 1099 B not provided Enter “Cost” Enter any adjustment as needed Wash sales, main home exclusion, reported cost basis adjustments, etc. (D-39 and 40) Click “Continue” if finished or “Save and enter another” if more entries to input

SPECIAL SITUATIONS Stock Purchased at Various Times Instead of Entering all dates individually, Check box “Alternate option” under “Date Acquired” and select from dropdown menu Various – Short term Various – Long term

STOCK PURCHASED AT VARIOUS TIMES Check here Select here

SPECIAL SITUATIONS Brokerage Statement with Multiple Entries Stock Purchased at Various Times Instead of Entering all dates individually, Check box “Alternate option” under “Date Acquired” and select from dropdown menu Various – Short term Various – Long term Brokerage Statement with Multiple Entries

BROKERAGE STATEMENT WITH MULTIPLE ENTRIES Allowed to group entries together Total for each of 4 categories (should be grouped on statement already) Short term and basis reported Short term and basis not reported Long term and basis reported Long term and basis not reported Enter “Code M” after broker’s name in “Description of Property” Enter Date Acquired, Date Sold, Sale Price, Cost Basis In “Adjustment”, use Adjustment code ‘O’ and “$0” adjustment Send IRS the 1099B for entries with no reported cost basis See 4012 Page D-38 for instructions

SPECIAL SITUATIONS Inherited Property Stock Purchased at Various Times Instead of Entering all dates individually, Check box “Alternate option” under “Date Acquired” and select from dropdown menu Various – Short term Various – Long term Brokerage Statement with Multiple Entries Inherited Property

INHERITED PROPERTY -- DATE Decedent died prior to/after 2010 Considered long-term no matter how long property actually held In Taxslayer, Check box “Alternate option” under “Date Acquired” and select from dropdown menu “Inherited” Decedent died in 2010 Out-of-scope unless representative or trustee provides cost basis, holding period and gain or loss.

INHERITED PROPERTY -- BASIS Decedent died prior to/after 2010 Basis is generally considered FMV at time of death Decedent died in 2010 Out-of-scope unless taxpayer has written documentation showing basis, holding period and gain or loss

SPECIAL SITUATIONS Sale of Main Home Stock Purchased at Various Times Instead of Entering all dates individually, Check box “Alternate option” under “Date Acquired” and select from dropdown menu Various – Short term Various – Long term Brokerage Statement with Multiple Entries Inherited Property Sale of Main Home

Sale of Main Home Main Home Ownership and use tests May be nontraditional home Taxslayer has a “Sale of Main Home Worksheet” in the Capital Gain or Loss section Figures Gain or Loss Amount Realized (on sale) Determines (Cost) Basis Maximum Exclusion Use Pub 17 or 4012 pages D41-43 if you have questions

CAPITAL LOSS CARRYOVER Check last year’s return for carryover loss If there is, then input into Taxslayer in the “Other Capital Gains Data” section Short term loss carryover Long term loss carryover

How Do You Handle the Situation An elderly client comes in with a 1099-B. All your questions---when purchased, cost basis, were the dividends reinvested, etc ----are either answered by “my late husband bought them” or blank stares. What’s your next step?

How Do You Handle the Situation---Answer Ask if any papers at home Have client (or you) call broker to get some info Ask if any adult children to help gather info Other suggestions?? But first, determine the impact of the sale without having a cost basis ---if no significant impact, why the hassle?