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NEW COST
BASIS LEGISLATION LEAVES INVESTORS WHO
PURCHASED PRIOR TO JANUARY 1, 2011 TO FEND
FOR THEMSELVES
Although the Cost Basis legislation
which requires brokers to report their
clients’ cost basis has gone into effect as
of January 1, 2011, what most investors
don’t realize is that the requirement is
only for securities purchased after January
1, 2011. That means that brokerage firms are
only responsible for what was purchased this
year going forward and not for the millions
upon millions of shares that investors
currently own. This is potentially a huge
problem for investors because at the end of
the day, they are responsible for accurately
reporting their capital gains/losses to the
IRS.
In the last several years, Cost Basis
has taken center stage with the IRS,
Congress and the Financial Services
industry. The focus began back in 2005 when
the IRS reported over $11 Billion dollars in
underreported capital gains by taxpayers in
their Tax Gap Study. Then in 2008, the
Economic Stabilization Act was passed by
Congress which included the Cost Basis
Legislation and since then, the financial
industry has been busy making sure that they
will be compliant going forward from 2011
for stocks and 2012 for mutual funds.
So what does that mean for an investor with
a broker and an investor without a broker?
Practically the same thing, unless your
brokerage firm is going to provide you with
your cost basis for the stocks you already
own as a customer service. If not, then it
means that you will have to calculate and be
legally responsible for your cost basis
information as much as the guy who trades
online in his underwear at 2:00 a.m.! As
many investors already know, trying to get
the purchase or sale price of all your
reinvested dividends, corporate actions, and
other critical pieces of information
necessary to calculate your adjusted cost
basis, is time consuming, frustrating and
susceptible to human error.
Recently there have been articles and blogs
telling investors where they can go to
research pricing and corporate action
information in order to calculate their cost
basis, but Cost Basis adjustment was always
a very difficult calculation, even for
professionals, so how is an investor
supposed to research and calculate this
information accurately enough to report to
the Internal Revenue Service? What wasn’t
widely known until now is that there is an
amazing online tool available to the public.
It is called NetBasis and is available at
www.netbasis.com.
NetBasis can automatically calculate the
adjusted cost basis for any security going
back as far as 1925. It will take into
consideration all corporate actions as well
as any possible dividend returns or return
of capital that may have occurred during the
exact holding period of the investment, so
the information is specifically tailored to
the individual investor. It isn’t a table
where you try to see where your investment
fits in, nor is it just a pricing list where
you have to figure out the rest. You simply
choose your security, enter in your purchase
and sales date(s) and number of shares, and
NetBasis does the rest in seconds. It also
gives you the ability to choose your
accounting method which investors are now
able to do under the Cost Basis legislation.
NetBasis can also calculate the cost basis
for securities that were gifted or
inherited.
NetBasis is a system that was originally
designed for the financial services
industry. A professional version of NetBasis
is currently being used by brokerage firms,
accounting firms, Fortune 500 companies, and
universities, but now everyday American
investors can access the same tool and get
the same accurate results. For a small fee
of $19.50, an investor can enter multiple
buys and sells for one security and receive
their adjusted cost basis, gain/loss, sale
proceeds, fair market value, and a detailed
accounting page that provides a
chronological listing of all of the
corporate actions and other adjustments that
have occurred to your security.
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