Cost Basis Reporting Takeaway: Identifying Debt

The operational challenges of cost basis reporting compliance have not yet fully abated. “There will likely be a tsunami of calls
from confused investors who don’t understand their tax reports and some incorrect reporting by financial firms which will need to redo their work,” describes cost basis expert Bob Linville, Scivantage Director of Product Management, in a recent FinOps Report piece.

As Linville lays out a recommended gameplan for firms, there are even more challenges ahead as complex debt instruments come into play in January 2016. Looking towards this milestone, there is a fundamental list of data necessary to identify debt covered in 2016—this includes:

  • -The variable rate, inflation indexed and contingent payment debt
  • -Debt with a stepped interest rate
  • -Convertible debt
  • -A stripped bond or stripped coupon subject to section 1286
  • -Debt that requires payments of either principal or interest in a currency other than the USD
  • -Certain tax credit bonds
  • -Debt with a payment-in-kind feature
  • -Debt issued by a non-U.S. issuer
  • -Debt, the terms of which are not reasonably available to a broker within 90 days of acquisition
  • -Debt that is issued as part of an investment unit
  • -Debt evidenced by a physical certificate unless such certificate is held (whether directly or through a nominee, agent, or subsidiary) by a securities depository or a clearing organization described in section 1.1471-1(b)(18)

Is your firm grappling with issues regarding simple and complex debt instruments? Share your questions and thoughts at our Cost Basis Reporting Forum.

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