Looking at my investment tax state and see where IRS legislation requirements for noncovered cost basis is different from that of covered transactions. From my investment firm...
"Any sale of a security that is considered a noncovered security will still be included in the investment reporting section with the adjusted cost basis (where available) but the adjusted basis will not be transmitted to the IRS."
My fund was transferred from an estate so the cost basis was that immediatedly following the date of death. My question is if there is no requirement to report the cost basis to the IRS then do I report any captial gain from these assets liquidated during the tax reporting year ? If so, what cost basis can I use to minimize the capital gain ? If this information is not sent from the investment firm then the cost basis would solely come from me ?
You still are required to report the capital gain to the IRS, even if the cost basis is not being reported to them. As you correctly pointed out, the cost basis is the FMV of the security or securities on the date of death. You are responsible for reporting the cost basis (the investment firm will still provide the 1099-b to the IRS). You have no choice but to report the correct cost basis, so there is no concept of a basis that can minimize the capital gain, it is what it is. It is precisely because people were underreporting cost bases that Congress implemented the new rules regarding covered securities; brokerage firms are required to track cost bases now.
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