Cost basis reporting: changes for tax reporting

Due to legislation enacted by the U.S. Congress, UBS and all brokerage firms are now required to report cost basis information on certain securities to the Internal Revenue Service (IRS) as part of their annual tax reporting process.

These changes to cost basis reporting will be implemented in the following phases:

Security type

Cost basis reporting required for securities

Equities

Purchased on or after January 1, 2011

Mutual funds

Purchased on or after January 1, 2012

Fixed rate, fixed maturity (Simple) debt and options, including most municipal and corporate bonds

Purchased on or after January 1, 2014

Complex debt1

Purchased on or after January 1, 2016

Tax Year 2016: Tracking and reporting of cost basis continues equities, mutual funds, options and fixed rate, fixed maturity (simple) debt securities and begins for complex debt1

What this means to clients

Beginning with tax year 2016, adjusted cost basis related to the sale of complex debt securities purchased or acquired on or after January 1, 2016 will be reported to the IRS as a part of our annual tax reporting process, including any disallowed amount due to a wash sale securities. It will also be displayed on your 2016 Form 1099, which will be delivered in early 2017.

The reporting will include the following items for all debt securities:

  • Original Issue Discount (OID)
  • Amortize taxable and non-taxable bonds purchased at a premium and report the adjusted amount
  • Accrete taxable and non-taxable bonds purchased below par and report the adjustment amount

Questions

If you have questions or would like more information regarding the new cost basis regulations, please contact your Financial Advisor. If you are a UBS One Source client, please contact the UBS Service Center by calling the phone number listed on your statement.

1The IRS considers complex debt instruments as those that do not have a fixed yield and fixed maturity date. Examples included but are not limited to: debt instruments with more than one rate of stated interest (stepped interest rates), convertible debt instruments, stripped bonds or coupons, non-US Dollar payments of either interest or principal, instruments with terms no reasonable available to the broker within 90 days  of acquirement, other instruments that include contingent payments or variable rates, and other debt instruments not described here.