Fidelity has introduced a report analyzing the proposed cost-basis requirements and those finalized by the Internal Revenue Service to help registered investment advisors and broker-dealers meet the Jan. 1 effective date.
The report, available through Fidelity’s custody and correspondent clearing units, makes note of six key differences between the proposed and final rules, such as when certain types of securities are considered covered and how to determine cost basis for inherited securities.
Other differences: brokers are not required to accept standing instructions from clients on alternative cost-basis disposal methods; taxpayers will no longer have to obtain written approval from the IRS for the method of cost-basis calculation they select; for gifted securities, brokers will need to continue to maintain both the carryover and the fair market value as of the date of the gift; and the IRS is offering penalty relief in 2011 for transfers missing cost basis.
“While the final regulations are very similar to what was proposed, there are a few important differences that may impact broker-dealers, advisers and their end customers,” said Maggie Serravalli∫, executive vice president, Fidelity Institutional.
Fidelity has also created an online resource center spelling out cost-basis practices at: www.fiws.fidelity.com/costbasis.