On Friday, President Bush signed into law, as part of the Emergency Economic Stabilization Act of 2008 (H.R. 1424), mandatory basis reporting for brokerages and mutual fund companies. Beginning with stocks purchased after January 1, 2011, brokerages and mutual fund companies will be required to provide adjusted cost basis to both investors and the IRS. Mandatory reporting will be extended to shares in mutual funds purchased after January 1, 2012, and for debt instruments, options and other securities purchased after January 1, 2013.

After bouncing from one bill to another over two years, basis reporting was finally enacted when the extenders bill it was tied to was included in H.R. 1424, partially as a political maneuver. However, it happened, brokerages and mutual fund companies now must find serious solutions to the complex issue of maintaining accurate cost basis. Maxit’s clients are leading firms that recognized the need of providing fluid cost basis to clients and advisors. Many other firms, however, fail to recognize the strategic value of providing accurate adjusted cost basis and have settled for the “estimated” version of cost basis offered by back offices and other vendors. These firms will need to revisit their existing strategy as they decide whether to upgrade cost basis services to the bare minimum of the basis reporting requirements, or whether to truly make cost basis and tax management tools a key strategic differentiator for their firms.

After being tied to such disparate bills as farming, military and energy, basis reporting has now been added to HR 1424, the finance bill most will simply refer to as “the bailout”. It’s worth noting that basis reporting was not added as either increased regulation or a spending offset (scored at $6 billion over 10 years, it wouldn’t be much of an offset to the $700B bailout anyway). It was attached to the finance bill when an extenders package was tacked on following the House defeat last weekend. The finance bill has passed the Senate (74-25) and it’s now back to the House for a vote on Friday. Insiders say it will pass, but after this week nothing is certain. If the bill does pass, and basis reporting isn’t removed, all investors will benefit from a huge record-keeping relief.

 Most of us ended our summer vacations months ago, but Congress just returned yesterday.  Before they hit the beaches, Basis Reporting had been included in the “Jobs, Energy, Families, and Disaster Relief Act of 2008″ (S 3335). Speculation now is that Basis Reporting will still likely pass, but possibly not until after the November elections.

It’s been a hard twelve months for investors. As if the stock market hasn’t caused enough pain, the IRS issued two opinions that close loop holes for investors. Back in December the IRS put investors on notice that a wash sale does occur when a security is sold for a loss in a taxable account and repurchased in an IRA within 30 days (a particularly painful thought, since the deferred loss can never be recovered from an IRA).

And now it’s going to be even harder to file taxes as a professional trader. On August 11th, Judge Vasquez of the US Tax Court issued an opinion that could impact many investors. A Florida couple set up Alpha Trading Company and filed taxes as professional traders. Professional traders have the advantage of being able to write-off many expenses (they also use mark to market accounting, can take more than the individual limit of $3,000 in losses, but can not take advantage of the 15% long-term tax rate). Alpha Trading made approximately 300 trades per year. The Tax Court cited another ruling that suggests over 1,100 trades must be made for an investor to be considered a trader. The court also determined that the bulk of the trades were not made to take advantage of market swings. In fact, many trades were held over 31 days and the investors rarely purchased and sold stocks on the same day. The court also found the couple traded on only 63 days (a relatively small percentage of market days).

This case further demonstrates that the IRS will be giving much more stringent strutiny to tax filings by investors.

To support their growing independent advisor business and to streamline advisor workflow, Scottrade has selected Scivantage Professional to power their Advisor Services’ next-generation, advisor desktop platform. Scivantage Professional provides Scottrade Advisors with an integrated suite of applications that support their unique workflow—from opening/maintaining brokerage accounts and executing complex trade orders to proactive management of client portfolios from a single, browser-based interface.  Scottrade Advisors will also have access to Scivantage Maxit, the most complete cost basis, tax management and portfolio reporting solution, to enable timely and effortless investment tax decisions. 

To learn more about Scottrade’s selection and what it means for Scivantage, read the latest press release.

Adnane Charchour, President and CEO of Scivantage was selected by an independent panel of judges to receive the Ernst & Young Entrepreneur Of The Year® 2008 Award for New Jersey.  The award was presented at a gala event at the Marriott Teaneck at Glenpointe on Thursday, June 19, 2008.

View the video highlights of the event ceremony.

Congratulations to Adnane on this tremendous accomplishment.  Next up, the national event in November.  Read more

On Thursday the Senate Finance and the House Ways and Means committees agreed to use government income from basis reporting as the major offset for increased farm bill spending. This certainly isn’t a done deal, but with the House and Senate seemingly on the same page it now looks like basis reporting may have found a home.

The 2002 farm bill was set to expire last Friday. After President Bush originally said he’d favor a one-year extension if the bill was worked out before Friday, he ultimately signed a one-week extension. Both the House and Senate will continue to work on details of the bill this week, although the NationalJournal reports House Agriculture Chairman Collin Peterson has already hinted that he’ll ask for another extension through May 9.

The House Ways and Means Committee has teed up the Housing Assistance Tax Bill of 2008. The bill, offered by Chairman Charles B. Rangel (D-NY), provides tax credits and deductions, home-buyer assistance programs and other provisions all designed to aid the housing markets. As expected, the bill includes a Basis Reporting offset to pay for the measures.

Over in the Senate, they have their own housing bill which takes aim at foreclosures. The Foreclosure Prevention Bill of 2008 (HR 3221) does not include a Basis Reporting offset.

President Bush isn’t real keen on the Senate’s bill (among other reasons, he wants the effect of the first stimulus to take effect before considering additional measures). No White House comment yet on the House bill.

Join us for an in-depth review of Financial Guidance, Scivantage’s newest suite of financial analysis and planning tools designed to support the ever-changing requirements of financial advisors, as well as centralized planning departments.   

Register today for this free, live webinar to take a closer look at how the Financial Guidance solutions can enhance your existing financial planning strategies throughout each stage of the advisory process and help your firm build stronger, more profitable relationships.   The webinar is scheduled for Thursday, April 10th @ 4:15 PM EST.  For more information or to register for this webinar, please visit here.

Quick update: Not a lot to report on pending Basis Reporting legislation. Insiders say it’s not a question of “if”, but rather “when” and, maybe more curious, “which”. The consensus is that the legislation will pass some time in 2008, but it’s anyone’s guess to which bill will include it. As an extender, Basis Reporting is very attractive to legislators who would like to use the anticipated increase in tax revenues to offset spending elsewhere. It could end up being part of a Farm, Military or -the handicappers favorite- Housing bill.