Normally when the cost basis is incorrect, you are dealing with stock acquired through your company, often through an employee stock purchase plan (ESPP). In those instances, a portion of the gain on sale of the stock is reported on the W-2 form as wages. Usually the cost basis reported on the Form 1099-B will list the stock cost when acquired which does not include the discount the employee received, which is reported as wages on the W-2 form. In that instance, you need to add the discount to the cost basis on the Form 1099-B to arrive at the correct cost basis to deduct from the sale proceeds. Otherwise, you total income reported from the stock sale will be overstated.
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