How do I figure the cost basis when the stocks I'm selling were
purchased at various times and at different prices?
If you can identify which shares of stock you sold, your basis is what
you paid for the shares sold (plus sales commissions). If you sell a block
of the same kind of stock, you can report all the shares sold at the same
time as one sale, writing VARIOUS in the "date acquired"
column of Form 1040, Schedule D (PDF). However,
what you enter into the "cost or other basis" column is the total of all the
acquisition costs of the shares sold.
If you cannot adequately identify the shares you sold and you bought the
shares at various times for different prices, the basis of the stock sold
is the basis of the shares you acquired first (first-in first-out). Except
for certain mutual fund shares, you cannot use the average price per share
to figure gain or loss on the sale of stock.
For more information, refer to Publication 550, Investment Income
and Expenses.
Should I advise the IRS why amounts reported on Form 1099-B do not
agree with my Schedule D for proceeds from short sales of stock not closed
by the end of year that I did not include?
If you are able to defer the reporting of gain or loss until the year the
short sale closes, the following will allow you to reconcile your Forms 1099-B
to your Schedule D and still not recognize the gain or loss from the short
sale:
Your total of lines 3 and 10, column (d), on your Schedule D should equal
your total gross proceeds reported to you on all Forms 1099-B.
In columns (b) and (c) write "SHORT SALE," and
in column (f) write "See attached statement."
In your statement, explain the details of your short sale and that it
has not closed as of the end of the year. Include your name as it appears
on the return and your social security number.
For more on these rules and exceptions that may apply, refer to Chapter
4 of Publication 550, Investment Income and Expenses.
