BAILOUT BILL REQUIRES COST BASIS REPORTING
The Economic Stabilization Act (aka the Bailout Bill) requires mutual funds and brokers to provide cost basis reporting with respect to sold or redeemed fund shares acquired on or after January 1, 2012. Cost basis can be determined using average cost, FIFO, or any other default method that identifies specific shares. Year-end tax reporting must be sent by February 15. Broker to broker transfers require the transferor broker to provide written basis information to the transferee broker, who is only required to provide cost basis reporting to the extent such reporting was received. The cost basis reporting requirement also applies to other securities acquired after January 1, 2011.
OUR TAKE: The cost basis reporting requirement will require changes to firm’s operations. We expect the major service providers will offer a viable solution well in advance of 2011.