topic I know my cost basis - it is from an inheritance. I have... in State tax filing

How do I record Non-Covered Securities on my 1099B?

ryan-watt — Fri, 31 May 2019 23:48:24 GMT

I received a 1099B for stock I sold in an ESPP. The majority of the sale is shown as "covered securities" & either short or long term gains. However, a portion of the proceeds is showing as "Box 6 Non-Covered Securities" and it doesn't show a cost basis or date of acquisition. How do I record this?

You probably will not like this answer - many people don'...

TomYoung — Fri, 31 May 2019 23:48:26 GMT

You probably will not like this answer - many people don't - but you get that information from your own records, just like investors have been doing for decades.

The concept of "covered" and "noncovered" securities is very recent and is being phased in, so 1099-B's will continue to report certain sales as noncovered for many years to come.

TurboTax Premier has some assistance available that may be able to come up with a reasonable estimate of basis, but you still need to know an acquisition date for the best accuracy. EDIT: as of the 2014 tax year TurboTax dropped this support.

To reconstruct your basis in the noncovered securities you need to go through old broker's statements - most are now available online - for any securities you purchased directly. Inherited securities have a basis that's the fair market value of the securities at date of death and securities received via "gifts" retain the basis of the donor. And, of course, there's other ways you might acquire securities, too, with yet other basis considerations.

If you can't figure out your basis you might ask a new question, disclosing the security sold and whatever information you do have to see if somebody can assist.

Finally, understand that if you can't really develop a basis that would withstand IRS scrutiny then you pretty much have to use a basis of $0. This results in all the proceeds being taxed, which is not as bad as it sounds because if the holding is long term - as probably most noncovered securities are - the the most likely tax rate is 0% or 15%, which is fairly modest.

You record a noncovered security using the 1099-B interview and providing your own date of acquisition, (if it's not reported on the 1099-B) and your own determination of the security's basis.

Tom Young

I have the same problem as ryan.watt. If I understand cor...

Anonymous — Fri, 31 May 2019 23:48:28 GMT

I have the same problem as ryan.watt. If I understand correctly I have to download or review all transactions from my broker.In my case the dates run from 01 jan 2005 to 20 dec 2011 then try to average all the securities.

IF you sold all your holdings in a stock, there is no nee...

TomYoung — Fri, 31 May 2019 23:48:30 GMT

IF you sold all your holdings in a stock, there is no need to "average." You simply add all your "buys", which may include reinvested dividends, and use that sum. IF you sold sold some of your holdings of a stock you use First-in, First-out to determine the basis.

That's what I needed to know. Thanks not only for answer...

Anonymous — Fri, 31 May 2019 23:48:31 GMT

That's what I needed to know. Thanks not only for answering my question but also the quick response .

I know my cost basis - it is from an inheritance. I have...

jill — Fri, 31 May 2019 23:48:33 GMT

I know my cost basis - it is from an inheritance. I have MULTIPLE non-covered and covered securities, but the Schedule D form and 1099-B that is in Turbotax doesn't allow for multiples and line item entries

Sounds to me like you are trying to enter this in "FORMS...

TomYoung — Fri, 31 May 2019 23:48:35 GMT

Sounds to me like you are trying to enter this in "FORMS MODE" or something. TurboTax can take something like 2,000 different "trades" which is more then enough, I assume. Use the interview to enter your information.

For non-covered securities - what this means (regardless...

jill — Fri, 31 May 2019 23:48:36 GMT

For non-covered securities - what this means (regardless if long or short term) is that the broker is not providing the cost basis. You need to provide it. they just handled the sale. If you know when you purchased the security, you can look up the cost basis at - http://www.marketwatch.com/tools/quotes/historical.asp There are other sites out there, but this is the one I used.

Took me awhile to figure it out - see below

In Turbotax - for the 1099-B

box A - short term covered
box B - Short term non-covered
box D - long term covered
box E - long term non-covered

This was a little more complicated than usual because the...

klevenms — Fri, 31 May 2019 23:48:39 GMT

This was a little more complicated than usual because the sale (and cost basis) was in 2013. As part of sale agreement, additional, milestone payments will continue for subsequent years, so the original cost basis isn't relevant. The best advice I could find is to use zero as the cost basis.

Thanks for the answer. When using this technique, would...

jwevans1 — Fri, 31 May 2019 23:48:41 GMT

Thanks for the answer. When using this technique, would one want to use that day's closing price? Or be on the conservative side and use the low price?

Your right, don't like the answer but can live with it. I...

kpaskiewicz — Fri, 31 May 2019 23:48:42 GMT

Your right, don't like the answer but can live with it. It's all long term.

Re: You probably will not like this answer - many people don'...

CB57 — Tue, 11 Feb 2020 22:17:18 GMT

What if it's INHERITED? No one on the internet can explain. Turbo tax has a drop-down menu of short term, long term. Not covered is either short or long term plus two more. Nothing explained is clear.

Re: How do I record Non-Covered Securities on my 1099B?

ColeenD3 — Tue, 11 Feb 2020 22:25:39 GMT

Inherited property is always long term.

Re: How do I record Non-Covered Securities on my 1099B?

JJPA — Mon, 06 Apr 2020 12:57:38 GMT

I have been reading this strand and it is very helpful; however, I am still having trouble with entering the information. I am doing an estate return and I have a 1099-B. The form has a summary part that lists the Long Term Noncovered and then Long Term Covered and Noncovered (and provides the basis). In the TOTAL REPORTABLE AMOUNTS section it lists the total PROCEEDS (box d) and then the TOTAL Reportable Cost or Other Basis (box 1e). When entering into Turbo tax where do I enter the NON-REPORTABLE basis to bring the taxable amount down to where it should be?

Do you just add it to the box 1e?

Re: How do I record Non-Covered Securities on my 1099B?

ThomasM125 — Mon, 06 Apr 2020 21:59:36 GMT

When you enter a form 1099-B in TurboTax, if the cost basis is not correct, you should enter it as listed on the form, then click on the "I'll enter additional info on my own" tab to enter the correct cost basis.

Re: How do I record Non-Covered Securities on my 1099B?

subpopstar — Fri, 17 Apr 2020 00:52:06 GMT

Like others, I'm finding this thread helpful though it was started last year.

My question is around stock awarded as service awards by my wife's company, i.e. five shares for five years, ten shares for ten years, etc. The company was acquired by a private firm last year and the stock liquidated. The transfer agent handling the transaction coded Box 5 as Non-Covered Securities - Code X (unknown Holding Period).

Even though it would be simple to go back and determine the quarter in which the stock was awarded is there any benefit to doing so? The cost basis for us is zero since this was simply awarded and we'll pay tax on the entire proceeds, correct?

Final question: How is this coded in TurboTax? The drop-down box had options such as ESPP, NQSO, RSU, etc., but this was none of those; it was simply awarded. What is the correct acquisition designation?

Thank you for the help!

Re: How do I record Non-Covered Securities on my 1099B?

TomYoung — Sat, 27 Mar 2021 12:56:22 GMT

"The cost basis for us is zero since this was simply awarded and we'll pay tax on the entire proceeds, correct?"

It's impossible for anyone here to answer that particular question "definitively." Employers are not really allowed to make non-taxable "gifts" to employees, except in very nominal, minor amounts. You can understand why that's so: if employers could make "gifts" of stock to employees then the employer could avoid paying payroll taxes on the "gift", employees could avoid having taxes withheld from these "gifts", and so forth. So most grants of stock, stock that the employee could sell the day they acquired it, is considered "compensation" and that compensation shows up in the W-2, and the employee and employer pays taxes on that compensation.

"Final question: How is this coded in TurboTax? The drop-down box had options such as ESPP, NQSO, RSU, etc., but this was none of those; it was simply awarded. What is the correct acquisition designation? "

The correct acquisition designation is that you "purchased" the stock on the date you acquired it and purchased the stock at the same per share "fair market value' the employer used to calculate the compensation reported on the W-2, if any.

That's not to say that every grant of stock shows up on the W-2. I'm sure that employers, either through ignorance or guile, omit that on the W-2 meaning that "in effect" the stock was a "gift", though that introduces another wrinkle: recipients of "gifts" inherit the basis of the grantor of the gift.

The "most correct" answer to your question is: go back and look at the W-2s for the year of the grant to see if the stock is included in that year's W-2. If it is then the basis of the gross number of shares in the grant, before any shares were withheld or sold "for taxes", is the same as that compensation. Nobody here can look at that information and make a determination. Only you can. (Of course if your income is such that the LTCG is taxes a 0%, then there's no point in even determining a correct basis. You taxes will be the same with or without a basis figure included in the sale.)

Re: How do I record Non-Covered Securities on my 1099B?

2997 — Sat, 02 May 2020 19:45:38 GMT

How do I obtain the Acquired date and cost Basis

Re: How do I record Non-Covered Securities on my 1099B?

tomandjerry1 — Thu, 08 Apr 2021 17:14:12 GMT

As Tom has indicated in his entry above, "It's impossible for anyone here to answer your particular question "definitively." ". For your question, "the Acquired date and cost Basis" depends on what has been sold and how it was acquired. If this is just a sale of a security which you purchased in a single transaction on some prior occasion and the broker that's made the sale has not supplied the date and cost from the original transaction, then you'll need to consult the settlement statement (or account statements) from when you made the purchase. If you're selling an aggregate quantity of shares which were acquired on different dates, for varying purchase amounts, then you'll need to gather this from the separate settlement statements you received when making these purchases (which should also appear on you brokerage's account statements). You would then report the sales for each set of securities using the corresponding date and cost. The trickiest situation is when you've sold a mutual fund which you've purchased in different amounts at different times and which has then reinvested the dividends the fund pays to add to the shares you own. In this case I'd refer you to the vast collection of on-line articles you'll uncover by Google'ing "How do you calculate the cost basis for a mutual fund over a long time period" -- start with www.investopedia.com.

Re: How do I record Non-Covered Securities on my 1099B?

forinterest — Tue, 11 May 2021 21:45:17 GMT

There is no "I'll enter this information myself" option for me. If I enter the basis and wash information, do I then change the category to A instead of B?

No matter what I enter, this form has a "YES" on the "missing info" checkbox.

How do I circumvent this? Turbo tax is keeping me in a loop on about 12 non-covered security sales.