Non Covered security sale

[degerton]

I had some company stock that my company gave me probably in 2007 or so,  when I was working. I have been retired since 2009 It has really done very badly and lost value to the tune of about $10k. I sold it last year to simplify the number of accounts I have, for only $2k. Morgan Stanley sent me a package of tax details summarized below 

They reported it on a 1099-B Consolidated Tax Statement

1d Proceeds                                        $2004.59

    Covered securities                                     $0

    Non Covered Securities                  $2004.59

1e Cost basis for covered securities is           $0

Later on in the Morgan Stanley paperwork it has 1099 Copy B for Recipient. In that one it shows the cost basis in column E

1099 B Long Term Noncovered Securities

Box 1d (basis reported to IRS)                        $0

Box 1e (basis not reported to IRS)               - $10,555.82 on proceeds of $2004.59

My question is, am I allowed to claim the basis for my personal taxes. If I report that it shows a loss of 8k plus, which reduces my tax bill. Am I allowed to use the cost basis this way?

[DavidD66]

Yes!  You not only are allowed, that is the proper way to report the sale.  It does seem odd that your 1099 Consolidated has two different amounts for the cost basis.  You should check the paperwork that shows the actual cost basis and make sure it is not a supplemental schedule.  Typically, for company stock issued by an employer, the broker reports the cost basis as zero, and the actual cost basis (the value of the stock, and the amount you were taxed on when you recieved it) has to be added as an adjustment to the cost basis.  Another possibility is that Morgan Stanley issued a Corrected 1099 Consolidated.  If so, it will be clearly marked as such on the form.  If that's the case, be sure to use the corrected version and disregard the other one.  Either way, you will report a cost basis of $10,552.59.  

If you have not capital gains to offset with your loss, you will be able to realize a loss of $3,000 on this year's tax return.  The unused loss will roll forward to the next year, and you can take another $3,000 loss.  This will continue until the loss is used to offset capital gains or used up $3,000 per year.