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

[ryan-watt]

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?

[TomYoung]

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

[Anonymous]

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.

[TomYoung]

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.

[Anonymous]

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

[jill]

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

[TomYoung]

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.

[jill]

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

[klevenms]

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.

[jwevans1]

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?

[kpaskiewicz]

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

[CB57]

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.

[ColeenD3]

Inherited property is always long term. 

[JJPA]

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?

[ThomasM125]

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.