Difference between covered and non covered( basis when reported and non reported) to IRS, regarding capital gains and capital loss

[john-teichman]

I'd like to know about this one too.  In fact Turbotax added my short term gains as class C on the form but  doesn't explain or have a selection for that in the UI.  Thanks.

[pne]

If I have uncovered gains and don't have a record of the purchase, how do I declare cost?

[LeslieB]

In tax year 2011, new legislation was passed requiring brokers to report adjusted basis and whether any gain or loss on a sale is classified as short-term or long-term from the sale of "covered securities" on Form 1099-B. Prior to this time frame, it was hit or miss to get this level of detail from investment firms.  Covered just distinguishes the investments that must include this detail from those that do not, noncovered.  An investment is considered covered if it is:

• Shares of corporate stock acquired on or after January 1, 2011.

• Shares of stock in mutual funds and stock acquired in connection with a dividend reinvestment plan are generally not covered unless acquired after January 1, 2012. 

• Certain other types of securities (e.g., debt instruments and options) will be covered if acquired after January 1, 2014.

"Non-covered" securities are any securities purchased or acquired before the above effective dates. Transactions involving assets purchased and held prior to these effective dates can still be reported as they have been in the past, meaning that brokers may not provide detailed cost basis reporting to the IRS on the sales of "non-covered" securities.  They may decide to report only your gross proceeds. For these situations, it is your responsibility to report the proper cost basis on non-covered securities to the IRS. If you do not have this information, you can still seek help from your broker, but it may be a little more difficult than getting information for covered securities.

Let me know if this resolves your tax question. Thank you for choosing TurboTax.  Have a wonderful day!  ~Leslie, EA

[john-teichman]

Thanks Leslie very helpful!

[MnMnMarin]

Hello LeslieB

My Mother passed mid-year 2019 and  noncovered securities were sold and I am not able to find the cost basis for these Unit Investment Trust securities.  TurboTax Home & Business (for the Individual return) and TurboTax Business (for the Estate return) throws an error because I don't have a Cost Basis to enter.  What do I do?

[CatinaT1]

That's tough.  If you don't have records for this you will need to but a cost basis of $0 and pay tax on the full gain.

[Dave761]

I plan to sell mutual funds. I have received both covered and noncovered cost basis and gains and losses for the funds. The covered will appear on my 1099 but the noncovered will not. How do I claim the noncovered cost basis and gains and losses in computing capital gains and taxes on my 2020 tax return?  

[VolvoGirl]

Just enter the cost from your records.

[Anonymous]

does the fund show on the 1099B the cost basis?  uncovered just means the fund doesn't report the cost basis to the IRS.

[Beppe2002]

I have a record of what you classified as an uncovered gain.  The difference of the tax is $2.200 tax owed instead of a refund.   I tried correcting it in Turbotax but can't.  Even if I change the designation to D which is long term covered.

[fanfare]

@Beppe2002  You can't change the sales category from E to D.

Just delete wrong transaction and reenter it with the correct basis.

Category E is a trigger to IRS that you are supplying the basis.

Unless there is something unusual, they don't care.

[hunt1806]

Turbo Tax refuses to recognize the basis I computed for non covered mutual fund shares sold, and wants to report the entire proceeds as  the capital gain.  This is a long term gain and I computed the basis using average  cost per share from my own records.

[JohnB5677]

You can make a correction in the 1099-B entry screen.

As you continue through the interview you will be able to manually enter each transaction.

1. Box 1e is the Cost or basis.
2. If it blank on your 1099-B, leave it blank.
3. Just below that is a check box The cost basis is incorrect or missing on my 1099-B.
4. Let us know if any of these situations apply to this sale
5. Select None of the above.
6. I know my cost basis and need to make an adjustment.
7. Enter your adjusted cost basis.

[povertywages]

How about crypto currency sales and purchases.   I only received a tax statement.  Do I count these as covered or non covered?  All of the crypto is short term, all transactions were made in 2020.  Thanks