Cost Basis Reporting Takeaway: FinOps Reports on the “Final Lap” of Regulations

While Phase III Cost Basis Reporting regulations were implemented in January 1, 2014, firms are still grappling with the operational toll of compliance, particularly as it relates to simple debt instruments. In this in-depth FinOps Report piece, industry expert Bob Linville, Director of Product Management at Scivantage, takes a focused look at the final phase of regulations with a recommended game plan for firms:

  1. Test the rules you are using to define bonds as covered in 2014. Have you correctly identified bonds that have variable rates, tax credits or contingencies that make them reportable in 2016 rather than 2014?
  2. Test the default methods. Are you applying the constant yield method to all bonds acquired at a premium and the ratable method to bonds acquired at a discount?
  3. Test the rules applied when elections are made. If the election for constant yield method is made, it should change the basis calculation for a bond acquired at a discount, but it should not change the calculation for a bond acquired at a premium.
  4. Audit your results. These calculations are not new. These rules have been in the tax code for thirty years. The only thing that has changed is that brokers now have to apply these calculations according to the tax code and report the results. Whatever auditing firm you use should be able to audit your results and tell you whether your calculations are accurate.

How is your firm dealing with this final leg of cost basis reporting compliance? Share your thoughts and join the conversation at our Cost Basis Reporting Forum.

Read the full FinOps article here.

Posted in Basis reporting legislation, Cost Basis, Scivantage Maxit, tax management and tagged , , , .