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Pastimes : Investor Accounting

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From: HIA3/6/2012 2:15:00 AM
   of 19
There's an odd thing about the new 1099-B which is the accounting of buy and sale of stocks for the IRS.

The wash sale amounts are included in the total cost basis. And then there is a total wash sale amount. Simple enough, just subtract the total wash sale amount from the total cost basis and have a correct accounting. Next the wash sale amount adds to the basis of the positions not closed out. Of course the positions not closed out are not included on the 1099-B.

The problem is, say that the positions that had the wash sale amount added to their basis were closed out. In that case, the total cost basis includes both the wash sale amounts of the wash positions and the adjusted basis of the latter positions to correct for the wash sale. So, it might be expected that the wash sale amounts shouldn't be subtracted from the total cost basis since they don't ultimately apply. However, since the wash sale wasn't excluded from the total cost basis and the adjustment for the wash sale was included then ... just do the same damn thing as before ... and subtract the total wash sale amount from the total cost basis and have a correct accounting.

Now if you want to do a correct line-by-line Schedule D and D-1 accounting then just subtract the wash sale amount of each position on the 1099-B from the cost basis of each position. Of course the gain/loss is zero for that position. But don't add the wash sale amount to the cost basis of the last position because that's already done !

And there's have another problem. The 1099-B doesn't match to the transaction confirmations or to the account statements but arranges the share numbers and amounts differently. So a month-by-month accounting might be used or might not be used. A least I can use my month-by-month accounting to check the bottom line.

Also, I just took a quick look at the Schedule D for the 1040A and it hasn't changed. The total proceeds are reported just a before and it was always important to match that number on the Schedule D. But now the total cost basis is also reported and the total wash sale is reported. But the wash sale amount doesn't have a column on the Schedule D. So, as I said before, the IRS would have to subtract the total wash sale from the total cost basis to match the total cost basis as filed on the Schedule D. And, I'm saying do match the total proceeds of the 1099-B on the Schedule D but the total cost basis of the Schedule D should match total-cost-basis minus total-wash-sales of the 1099-B.

Next, I took a look a the Schedule D instructions and I don't see anything new there. So the point is the new 1099-B and the new tax reportings.
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