Does the IRS require a supporting document/proof for a code B cost basis correction on Form 8949, for a gifted stock that was sold, when filing by paper?

[js1_]

I sold some stock in Dec 2019 that was gifted to me for long term capital gains. The cost basis for this stock reported in box 1e on my 1099-B was incorrect. This incorrect cost basis was also reported to the IRS.

The cost basis reported was too high, and matched exactly box 1d (proceeds). The actual cost basis (which should be the gifter's) was lower. I corrected the cost basis on Form 8949, using "code B" in column F.

I will be filing by mail/paper filing.

I have a copy of the gifter's 1099-B and "Details of 2018 Investment Activity", which shows the original purchase of this stock and the correct cost basis, before it was gifted.

My question is - am I required to send the gifter's "Details of 2018 investment activity" (or something else) in with my tax return, to support the code B/cost basis correction? Or does the IRS not want this included?

Thank you.

[fanfare · Accepted solution]

The IRS does not want any such attachment.

Keep such documentation in your important tax records.

Note: you can e-File even with code B in your form 8949.

Paper returns are held up right now.

Is there some other reason for a paper return ?

[js1_]

@fanfare 

Thanks.

Without getting into detail, this is for a 1040-X that is amending a recent 2019 e-filing. I understand the IRS may offer 1040-X e-filing soon, so I might wait a few months to see if that becomes available before paper filing.

I had one more semi-related question I was wondering if you happened to know the answer to. My 1099-B (not the gifter’s) shows for Box 1b “Date Acquired” the date the gifter purchased the stock, not the date I received it as a gift. I used this date (gifter’s purchase date) on the 8949, since it is consistent with what the broker reported on my 1099-B to the IRS.

Is it required to write a note on the 8949 that states when I received the gift/stock, or is this probably unnecessary?

[fanfare]

Since you are correcting the basis, why not correct the date also ?

HOWEVER, there are so many other variables as pointed out in this article which I will not attempt to recap for you. https://www.schwab.com/resource-center/insights/content/how-to-value-a-gift-of-stock