Understanding the New Cost Basis Reporting Rules

Study Level:  Basic
Delivery Method:  Self-study online
Provider of Record: WebCE
Field of Study: Taxes 
Prerequisites or Advanced Preparation: None

Course Description:

Beginning on January 1, 2011, legislation came into effect that established a new requirement for brokers to track and report cost basis on securities transactions to the IRS to better ensure that taxpayers properly report their gains and losses on investments and pay taxes as appropriate.

Over the long run, the new rules will make it easier for taxpayers to track the cost basis for most of their investments, in turn simplifying reporting and preparing returns during tax season. However, in the intermediate term, the introduction of cost basis reporting brings new complexities and challenges for tax professionals and financial planners to manage. 

This course presents the details of the new cost basis reporting rules and describes their current and future practical implications for taxpayers, tax preparers, and financial planners.

Learning Objectives: 
Upon conclusion of this course, students will be able to:
  • identify the types of securities affected by the new costs basis reporting rules and the dates on which the provisions of the rules come into effect
  • identify the general reporting requirements placed on financial intermediaries for covered securities
  • identify the default methods for identifying which lots of securities are sold for stocks, bonds, mutual funds, and dividend reinvestment programs
  • identify the general operation and tax consequences of the seven common methods of accounting for the sale of securities from a taxpayer’s investment portfolio
  • recognize the types of events that may cause a mismatch between cost basis records kept by financial intermediaries and financial planning firms