GainsKeeper: Blog

November 9, 2007

On October 25, 2007, a revised version of earlier broker Form 1099 cost basis reporting proposals was introduced as part of a larger tax bill. It would be effective for stock acquired on or after January 1, 2009 and other specified securities such as debt instruments and certain options acquired on or after January 1, 2011. Today the House of Representatives, on a 216 to 193 vote, approved H.R. 3996, the Temporary Tax Relief Act of 2007 (the Act), which includes the revised cost basis reporting proposal (Act Section 622). The Act has been controversial because of its tax rules for carried interests that would adversely affect hedge funds and their managers, as well as other provisions that would adversely affect other interest groups and taxpayers. As a result, the administration has indicated that it would veto the Act in its present form. Before it could even come before the President however, the Senate must pass a comparable tax bill and a conference version could need to be approved. It is uncertain, given some of the controversial provisions, the extent to which a Senate tax bill, even if passed, would differ from the Act. It should be noted that in spite of the recent controversies, there has been little discussion of the cost basis reporting provision and thus cost basis reporting could survive various amendments and changes that might occur as this year’s tax legislation moves forward.

Bottom line: Cost basis reporting has moved another step closer to potentially becoming law.

Stevie

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