Tax & Accounting Blog

IRS Delays Effective Date for Reporting Basis on Sales of Debt Instruments and Options

Cost-Basis Reporting, Information Reporting for Wealth Management, ONESOURCE, Tax Information Reporting, Trust Tax June 8, 2012

The IRS announced on May 2, 2012 that it intends to delay the effective date for reporting basis on sales of debt instruments and options.

The Energy Improvement and Extension Act of 2008 requires brokers to report the basis on sales of certain securities. The Act applies to stock acquired on or after January 1, 2011, mutual fund shares acquired on or after January 1, 2012, and debt instruments acquired on or after January 1, 2013, or such later date as determined by the Secretary of the Treasury. It also applies to certain options granted or acquired on or after January 1, 2013.

In November 2011, the IRS issued proposed regulations. Under the proposed regulations, a broker is required to report the basis for certain debt instruments acquired on or after January 1, 2013, and for options granted or acquired on or after January 1, 2013.

On May 2, 2012 the IRS issued Notice 2012-34. The Notice states that the rules in the proposed regulations when finalized will not apply until January 1, 2014. For example, the regulations will not apply to a debt instrument acquired before January 1, 2014, and they will not apply to an option granted or acquired before January 1, 2014. This gives brokers an additional year to build and test the systems required to implement the reporting rules for debt instruments and options.

Brokers already must report the basis for sales of stock and mutual funds, under final regulations issued in 2010.