Cost Basis Reporting Member Resource Center (2024)

Tax Matters

In 2008, Congress enacted mandatory cost basis reporting for brokers and mutual funds. The legislation amended Internal Revenue Code section 1012 (seesections 1012 (a) – (d)) and section 6045 (seesection 6045(g)) and added new sections 6045A and 6045B. The new reporting requirements are effective for mutual fund shares acquired on or after January 1, 2012; they are effective for all other equities acquired on or after January 1, 2011. The Internal Revenue Service issued final regulations on the cost basis reporting requirements in October 2010.

Internal Revenue Code

• Section 1012 – Basis of Property – Cost
• Section 6045 – Returns of Brokers
• Section 6045A – Information Required in Connection with Transfers of Covered Securities to Brokers
• Section 6045B – Returns Relating to Actions Affecting Basis of Specified Securities
• Joint Committee on Taxation’s Explanation of Cost Basis Legislation [pdf]

Notice 2011-56

• ICI Memorandum 25294 - IRS Issues Guidance on Average Cost Default Method, Other Cost Basis Reporting Issues
• ICI Memorandum 25364 - ICI Comment Letter on Cost Basis Reporting

Final Regulations

• ICI Memorandum 24610 - Final Regulations on Cost Basis Reporting

Proposed Regulations

• ICI Memorandum 24045 - Proposed Regulations on Cost Basis Reporting
• ICI Memorandum 23387 - ICI Comment Letter to Treasury and IRS on Mandatory Cost Basis Reporting
• ICI Memorandum 24133 - Institute Comment Letter on Proposed Cost Basis Reporting Regulations
• ICI Memorandum 24322 - Institute Submits Additional Comments on Proposed Cost Basis Reporting Requirements
• ICI Memorandum 24417 - ICI Letter to Treasury Department and IRS on Reporting Holding Period for Gifted Shares that Previously were Inherited

IRS’s Cost Basis Reporting Overview and FAQs

IRS Forms

• Form 1099-B
• Form 1099-B Instructions
• Form W-9
• Form W-9 Instructions

ICI Contact on Tax Related Matters

• Tax related questions on Cost Basis Reporting may be directed to Karen Gibian, Associate Counsel – Tax Law, atkgibian@ici.orgor 202-371-5432.

Fund Operations Initiatives

ICI Broker/Dealer Advisory Committee (BDAC)– Cost Basis Reporting Task Force

The Institute’s Broker/Dealer Advisory Committee CBR Task Force is assisting the Depository Trust & Clearing Corporation (DTCC) with enhancements for mutual funds to Fund/SERV, Networking and the Cost Basis Reporting Service to comply with the new regulations. The Task Force continues to provide industry feedback on mutual fund issues and the DTCC enhancements were implemented in 2011 in order to comply with the cost basis reporting regulations for mutual funds effective 1/1/2012.

• The BDAC CBR Task Force has developedrecommended practicesfor firm-initiated FUND/SERV redemptions on fund-controlled accounts.
• The BDAC CBR Task Force also worked with DTCC on a separate cost basis transfer reporting guide for mutual funds. The "Supplemental User Guide for Mutual Funds" includes an executive summary/overview, glossary of terms, frequently asked questions, and documentation on CBRS for mutual funds (that includes account transfer examples using various basis methods that illustrate the movement of data using CBRS record layouts). The guide is located on DTCC’s website at:http://www.dtcc.com/products/documentation/cs/cbrs/CBRS_SupplementalGuide.pdf

ICI Contacts on BDAC Activities

• Questions regarding BDAC's cost basis reporting activities may be directed to Jeff Naylor, Director – Operations & Distribution, atjeff.naylor@ici.orgor 202-326-5844.
• The information being developed by BDAC is applicable to any taxable account which includes those held by bank/trust intermediaries. As a result, ICI's Bank, Trust and Retirement Advisory Committee (BTRAC) is using the BDAC work product for CBR. For questions related to CBR and BTRAC, please contact Jeff Naylor atjeff.naylor@ici.orgor 202-326-5844.

Depository Trust & Clearing Corporation (“DTCC”)

DTCC has enhanced its Cost Basis Reporting Service (CBRS) to help financial firms and other market participants comply with the new regulations that require the reporting of cost basis information to investors and the federal government.

• Overview

  The CBRS is an automated system that gives financial firms the ability to transfer customer cost basis information from one firm to another on any asset transfer. The system provides a centralized communications hub that mitigates risk, promotes standardization and helps customers meet their regulatory requirements in an efficient and cost-effective manner.

• Who Can Use the Service

  All financial intermediaries subject to the IRS regulations are eligible to apply to use CBRS, including firms who are not currently members of any service offered by one of DTCC’s affiliate companies.

• Information on CBRS

  Detailed information on CBRS may be found onDTCC’s website.

  The website contains links to DTCC’s Important Notices and Frequently Asked Questions (FAQs) on CBRS, including new account set up, record layouts, users guides, data input and output, and testing.

How to Contact DTCC

• Questions regarding CBRS may be directed to the DTCC Customer Support Hotline at 888-382-2721.
• You can subscribe to an RSS feed to receive DTCC Important Notices directly to your email address. To learn more about this service and to set up your own DTCC RSS alerts, visithttp://www.dtcc.com/subscription_form.php.

ICI Transfer Agent Advisory Committee – Cost Basis Reporting Task Force

The Institute’s Transfer Agent Advisory Committee (TAAC) CBR Task Force ("Task Force") is holding regular calls and developing documentation to assist fund transfer agents as they implement policies and procedures to comply with the new cost basis reporting regulations. The Task Force is focusing primarily on shareholder communications and servicing issues, as well the calculation and recordkeeping of cost basis information for shareholders.

• The Task Force has developed the“Shareholder Communications for Cost Basis Reporting”document to assist fund transfer agents as they prepare customer communications to educate and inform fund shareholders about the cost basis reporting rules, fund cost basis reporting policies and related customer options.
• The Task Force has developed the"Fund Checklist for Mandatory Cost Basis Reporting Implementation"document, which provides a list of implementation steps for mutual funds to consider as they prepare for mandatory cost basis reporting.
• The Task Force conducted a survey of the Transfer Agent Advisory Committee on mandatory cost basis reporting in July 2011, after the IRS issued its guidance on average cost as a fund default method (Clickherefor survey results).
• The Task Force developed theFrequently Asked Questions for Cost Basis Reportingdocument to serve as a resource to funds as they work toward implementation of mandatory cost basis reporting.

ICI Contact on TAAC Activities

• Questions on mutual fund transfer agent shareholder servicing and communications issues may be directed to Joanne Kane, Director of Operations and Transfer Agency atjoanne.kane@ici.orgor 202-326-5850.

ICI Webinars and Workshops on Cost Basis Reporting

• ICI CBR Workshops on Cost Basis Reporting for Mutual Funds

  • March 10, 2011 – Boston, MA
  • March 31, 2011 – Irvine, CA
• ICI Webinar – Implementing Cost Basis Reporting for Mutual Funds – January 5 2011

• ICI Webinar – Implementing Cost Basis Reporting for Mutual Funds – May 27, 2010