A "covered" security sale means that the broker is reporting the basis to the IRS. Understand that "covered" doesn't necessarily mean that the number reported by the broker is actually the correct basis number to use; there are valid reasons why the broker can report an "incorrect" figure here. As an investor you're still ultimately responsible for using the correct basis figure when determining gain or loss, so you do need to keep this in mind.
A "non-covered" security sale means that the broker is not reporting the basis to the IRS. Understand that "non-covered" doesn't mean that the broker doesn't actually know the correct basis to use; that basis might even be reported to you on your paper copy of the 1099-B, but the 1099-B the IRS receives won't have the basis number filled in. Whether a security sale is defined as "covered" or "non-covered" depends on the application of some fairly mechanical rules and if, by those rules, a trade is considered non-covered most brokers take the safe way out and not report the basis to the IRS, even if they know it.
A long term transaction is one where the sale of the security occurs more than 1 year after that security's acquisition. (There are a couple of important exceptions here concerning securities acquired via gift or inheritance.)
A short term transaction is one where the sale of the security occurs 1 year or less after the security's acquisitions. (Again, securities acquired via gift or inheritance can be exception cases.)
The categories are:
A - short term, basis reported to IRS
B - short term, basis not reported to IRS
C - short term, no 1099-B issued
D - long term, basis reported to IRS
E - long term, basis not reported to IRS
F - long term, no 1099-B issued
Tom Young
