Vast changes to cost basis reporting rules are set to go live in 2012. These changes will challenge - and possibly cause headaches for - advisors and their clients.

For the first time, custodians and brokers will have to report detailed cost basis information on equities acquired on or after Jan. 1, 2011 to advisors' clients (on a revised Form 1099-B), as well as to the IRS. Mandatory cost basis reporting will extend beyond equities to mutual funds, DRIPs and most ETFs acquired after Jan. 1, 2012.

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