Revised Rules for Reporting Sales of Capital Assets | Tax Tip of the Week | No. 136

New Form and Rules for 2011

When you sell stocks, mutual funds or other capital assets you will still report the gains or losses on Form Schedule D when you prepare your 2011 tax return.  But this year you must first show the sales activity on a new form—Form 8949 . This new form is where you show:  description of property, date acquired, date sold, sales price and cost basis.  Of particular note, however, you must also check a box indicating if the long- term or short-term cost basis is (A) reported to the IRS on Form 1099-B, (B) cost basis is not reported on Form 1099-B, or (C) when you cannot check Box A or B (when proceeds are not reported on a Form 1099-B). A separate Form 8949 should be completed, grouping all transactions by type (Box A, Box B or Box C) and also by short-term or long-term trades. The summary information from Form 8949 then flows to the revised Form Schedule D. This new form was created as a result of the new cost basis reporting requirements for brokers.  The new Form 8949 will help the IRS  better compare your reporting with the brokers, Form 1099-B statements.  It also opens an easy audit target when you show asset sales where the cost basis is not reported on a Form 1099-B.  Be prepared to substantiate cost basis calculations if you mark boxes B or C on Form 8949. Check with your broker to determine if they have their basis.  If not, take steps to determine the basis and update their records. We will let you know about other tax law changes in the coming weeks. Let us know if you have any questions. 

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