CBR Law

• Overview
• Five Key Questions

Cost Basis Reporting Law - Overview

On October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act (H.R. 1424). Included in this legislation is a provision that will require brokerage firms and mutual fund companies to track and report adjusted cost basis information to both investors and the Internal Revenue Service (IRS). The legislation outlines a preliminary timeline for mandatory reporting on select investment instruments, beginning with stocks purchased after January 1, 2011, shares in mutual funds purchased after January 1, 2012 and for debt instruments, options and other securities purchased after January 1, 2013.

Click here to review the cost basis reporting provisions outlined in H.R. 1424. To review the CBR law, go to Title IV, Section 403

• Brokerages and mutual fund companies will become system of record for investors' adjusted cost basis. Firms must be able to support any lot relief desired by clients.
• While firms will become system of record, individuals will remain responsible for certain specific basis adjustment issues. How far will firms go to help clients meet those responsibilities?
• Generally, cost basis calculations were not altered by the legislation. There are some exceptions; for instance, average cost will be allowed for DRiPs.
• Requirements focus on reporting basis on closed positions by year-end, leaving significant room for varied client experiences. Which firms will provide basis on open positions? Which firms will offer basis in real-time? Will firms offering support for mutual funds, options or fixed income in advance of the sliding deadlines?
• Reporting deadline extended from January 31st to February 15th.

What will this new legislative mandate mean for financial institutions? Leading financial institutions are not waiting for the new legislation to move forward with their cost basis reporting initiatives. Recognizing that the record-keeping challenges surrounding cost basis detract from the overall investing experience, leading firms are turning to Scivantage Maxit to solve the problem now. And firm's looking to grow their assets and build stronger relationships are not stopping with the anticipated minimum requirements of the legislation, they're using Maxit to provide pre-trade analysis, real-time portfolio reporting and tax management tools to help their financial advisors and their clients make more informed investment tax decisions.