Vogel Law Firm, Ltd.: estate planning law firm serving families throughout the State of Wisconsin

Monday, October 18, 2010

Investment Firms Required to Provide Cost Basis Information

Beginning with securities bought after January 1, 2011, investment firms will be required by law to calculate and supply cost basis information to investors. The cost basis information will be provided to the seller of the security on IRS Form 1099-B.

To date, some brokerage houses have taken the initiative to provide cost basis information to clients. For these investment firms, the new law will not be a hurdle. However, for those firms that have not historically supplied cost basis information, the new law will be an added burden to the already heavily regulated securities industry.

For financial advisors, the required cost basis information will reduce the number of calls received by tax preparers and clients seeking cost basis information. Unfortunately, the new law will still not eliminate the problems with cost basis on purchases made before January 1, 2011. In addition, I question how investment firms will implement changes to cost basis based upon the step-up in cost basis under section 1014 of the Internal Revenue Code. It has been my experience that investment firms and tax preparers are not consistently altering cost basis figures based upon date of death value step-up under the code. In this instance, will investment firms be required to reconfigure cost basis after a client's death?