How to report gain or loss for sale of assets from a WHFIT?

[psdeckers]

On the 1099-B provided by the broker, there is a section titled, "Undetermined term transaction for noncovered tax lots". There is information in Date sold (item 1c), Proceeds (item 1d) and Additional Information. Every other column is blank. The Additional Information reports a 'Principal payment cost basis factor' with a reference to note 16. Note 16 says if I know the cost of the asset, I can determine gain or loss. I do not know the cost of the asset.  The note goes on to say if you don't know the cost, "determine your cost basis by multiplying your adjusted cost basis by the cost basis allocation factor". 

For an example: The amount in item 1d is $1000. The cost basis factor in Additional Information is 0.02.

"Cost basis allocated to the sale" is "adjusted cost basis" * "cost basis allocation factor".

Question 1: What is the adjusted cost basis? (The item 1d is labeled Proceeds)

Question 2: What is the cost basis allocation factor? (The number listed in Additional Information is Cost basis factor.)

Question 3: How do I determine gain or loss?

Hopefully someone can decode this for me.

[MarilynG1]

What is the type of Asset that was sold?  The Cost Basis is generally what you originally paid for it.  

According to the info you posted, you would multiply the Adjusted Cost Basis by the factor .02 to determine your 'Corrected Cost Basis'.  Check the box on that page 'I need to adjust my cost basis'  and then enter the calculated amount. 

If you can give more info, we'll try to help.

Here's more detailed info on Cost Basis: Tracking Your Tax Basis.

@psdeckers 

[psdeckers]

The type of asset is DIV STRGY PRTFO. I do not know the exact date acquired other than the broker said it was 14 months prior to the sale. The Date Acquired on the 1099B is N/A. Cost or other basis is blank. 

After taking a break and looking at it again, I have a thought that might solve this riddle. This transaction is listed on the 1099B under the heading UNDETERMINED TERM TRANSACTIONS FOR NONCOVERED TAX LOTS. In parenthesis it says, Ordinary gains and losses are identified in the Additional Information column.  

For example, the proceeds of the sale are $1000. If I multiply that by the Cost Basis Factor, .02, identified in the Additional Information, does this give me the ordinary gains of $20? If so, then I would enter the cost of the asset as $980.

Is there a rule that brokers do not need to report gains or losses if the amount doesn't exceed a certain threshold? Similar to a bank doesn't need to report interest less than $10 but the interest is still taxable.

[DianeW777 · Accepted solution]

Yes, all taxable income is required to be reported with or without a tax form. 

If your investment has been with the same broker all along then you can use the date acquired provided by the broker. The bottom line for cost basis is that it is required to be tracked and known by you when you have 'noncovered' shares.

• Where do I enter or import a 1099-B?

The difference between covered and noncovered shares is who keeps track of the cost basis.

• For covered shares, the financial organizations are required to report cost basis to both you and the IRS. 
• For noncovered shares, the cost basis reporting is sent only to you.

Holding Periods:

1. Long term: held more than one year (one year plus one day) - received special capital gain tax treatment
2. Short term: held one year or less - taxed at your ordinary rate of tax

@psdeckers 

[psdeckers]

Thank you, this is most helpful.