Tax Reporting Issue

Discussion in 'Retail Brokers' started by Hurricane, Apr 8, 2012.

  1. Here's a situation I am encountering in my tax preparation and wonder how best to handle.

    + Bought 100 shares XYZ in 2009 for $1000.

    + Bought 100 shares XYZ on January 15, 2011 for $2000.

    + Sold 100 shares XYZ on January 16, 2011 for $2100.

    Per my way of thinking, I was day/swing trading XYZ and have to report my January 16 sale as a short term capital gain of $100. Had this occurred in my E-Trade account, I would have designated my last purchased shares for sale and my 1099 form would show the sale this way. But instead it was in my IB account, where to my knowledge, there was no provision to designate which block of shares you were selling. (This was recently added.) I recorded the transaction in my own records as selling the last bought shares but IB did 1099 form reporting without the basis since to their point of view I was not selling 2011 purchased shares. Their tax reporting is consistent with me reporting a long term capital gain of $1100. Do I:

    1) Handle it on a first in first out basis since that's consistent with my 1099 form and it all works out in the long run. (Bad since for all my transactions I'm talking about a swing in my taxes of about $30k.)

    2) Ask IB to correct my 1099. (Unlikely since this involves hundreds of these types of transactions.)

    3) Make my own adjustment on form 8949 per IRS instructions. (Seems technically correct but some increased risk of an audit. I would also have to track and report the offsetting adjustment at some point in the future, perhaps many years from now.)