The IRS has introduced a new tax form (Form 8949) for reporting capital gains and losses from stocks, bonds, mutual funds and similar investments. Starting with the 2011 tax year, investment transactions will be reported on the new Form 8949, Sales and Other Dispositions of Capital Assets.
Starting in 2011, cost basis information for “covered securities” will be included directly on the 1099-B. Brokers are required to provide cost basis for stock in a corporation acquired on or after January 1, 2011, for mutual fund shares acquired on or after January 1, 2012, for stock in a corporation purchased through a dividend reinvestment plan acquired on or after January 1, 2012, and notes, bonds, commodities (and derivatives or contracts based on commodities) acquired on or after January 1, 2013 directly on the 1099-B. Stock purchased prior to 2011, mutual fund shares purchased prior to 2012, and bonds purchased before 2013 will not have basis reported on the 1099-B. As before, this information will likely be found in other reports or data such as brokerage statements, year-end reports or trade confirmations.
The IRS has substantially revised Schedule D and created a new Form 8949. Starting in 2011, Schedule D now functions as a summary of all capital gains transactions. Individual investment sales are to be detailed on the new Form 8949. Any particular investment sales transaction will fall into one of three categories: Sales of covered securities for which cost basis is provided; Sales of non-covered securities for which no cost basis is provided on the 1099-B; or Sales of investments assets for which no 1099-B was received.
The new Form 8949 reflects this categorization. A separate Form 8949 is required for each type of transaction, with the appropriate check box indicated at the top of the form. Form 8949 is further divided into two pages, with short-term transactions being listed on page 1 and long-term transactions listed on page 2.
To phrase this a different way, there will be one Form 8949 reporting capital gains and losses where cost basis is provided (check box A), with short-term transactions listed on page 1 and long-term transactions listed on page 2. There will be a separate Form 8949 reporting capital gains and losses for which cost basis is not provided (check box B), with short-term transactions shown on page 1 and long-term transactions shown on page 2. And there will be a third Form 8949 reporting capital gains and losses where Form 1099-B was not received (check box C).
Totals from these separate Forms 8949 will be summarized on the newly revised Schedule D.
This change adds to the ever increasing complexity of your return. As always, if you have questions contact your tax advisor or Bond Beebe is always eager to help.