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1099B with no cost basis, How to Proceed?


ETax847

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It's your responsibility to prepare their tax return based on the information available, 

it's your client's responsibility to provide you with the relevant information.

The tone of your comments imply that you are trying to fix this for them,

which puts you in a difficult situation ?

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What to do next depends on how much the gain is with $0 basis, and how much effort the client is willing to put in to track it down, and how the stock was acquired.  I had one client who had inherited stock from a grandparent who died in the early 70's.  We had solid starting basis from that, and with the help of a broker traced the original stock through splits and spin-offs.  It took hours - and the client gladly paid me for those hours tracing and calculating.  Another client had no recollection, the total amount of sale was small, and he decided not to bother.

As others have said, it is the client's responsibility to give you the information.  If you're going to get dragged in to calculations, it still has to be based on information  the client finds somewhere, you need to be paid separately from tax preparation, and it's not going to be cheap.

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I do what Abby says. I use zero basis and tell the client the results. If that motivates them to search their purchase documents or work with their broker(s) or ask grandma when grandpa died or..., then the client will give me dates and basis. If they need help, I tell them my hourly fee -- IF I have the time.

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I try to send clients to their financial advisors to help with basis.  If they changed brokers, some won't want to take on the task, but we all see how much those broker fees can be so let the FA earn it.  Plus, FAs have access to all kinds of historical price data that we just don't, especially when companies merged and the original no longer exists.  (Now basis info goes with transfers, but that's a recent development.)  If the client has no FA or just owns the stock individually, as a last resort I look up the lowest price the stock ever sold for.  This may be available on BigCharts or the company website.  Even if it was in 1904, I'll go with that because the taxpayer could not have purchased it for less than its lowest price ever.  Follow the advice of other posters, however.  Put in the full amount with zero basis and see if that 0% tax applies--it's surprising how often it does even for clients with reasonable incomes.  Now that basis tracking is mandated, just think--in 50 years tax pros won't have this problem (except with original AT&T stock--I tell my clients to hang on to it and let their heirs get stepped up.)

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When I started working as a FA in 1992, I generated a spreadsheet which gave the cost basis information on the AT&T split up. It took me several Saturdays to complete it even though I had a book that had all the percentages. I went around to estate planning attorney's and CPAs pitching to them that we'd generate their cost basis for $200 - free if they became a client.

By about 1997 it was so freakin complicated I had to give up on it. When they started buying back / merging with their own spinoffs I became lost in how to do it. The spinoffs from the spinoffs were coming so quickly I couldn't keep up.

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If you can get an idea from them when they bought it, you can often figure out what the average cost was on the Big Charts website.  Sometimes it takes a little more time.  But it's billable time and they can pay you or they can pay uncle sam.  However, if they are a low-dollar taxpayer and they fall into a zero cap gain, then just put zero basis and move on.

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Big Charts won't help if the company merged, or went out of business.  Once a stock is delisted, BC drops it.  Info may still be available on the company website until that disappears for non-payment of web/domain fees.      However, the information might be on the company website with which it was merged.   The details can sometimes be found on business news websites.   Sometimes it takes a lot of searching.

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