<cpabakem01[at]yahoo.com> wrote:

- quote -

What if you manage to sell the certificate for something
(e.g. $5 to someone who collects old stock certificates)?
Doesn't that imply that it was never quite valueless, so you
can take the capital loss in the year of sale?

Seth

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"Carbondale_Mike" <mmiller[at]sopris.net> wrote:

- quote -

A check. Seriously, I wonder consider not keeping the
client. By 2002 and 2003 there is no excuse for a day
trader to have not kept records on his activity.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Thank you for the suggestion, especially the 1099-B total
being important. Unfortunately, since he was a daytrader at
the time, he bought and sold within the same day. I doubt
that historical stock price data would be sufficient to
establish a cost basis. We know where during the day he
sold, but not where he bought. My thinking is that if he can
prove that he neither added to nor removed money from his
broker account during the year period of trading, his
beginning of the year statement and end of the year
statement as well as monthly statements, should be able to
reflect how much his gain or loss was. One problem is
determining wash sales going from one year into the next.
When he finally cashes out, we know how he actually did, but
how do we determine the first year with any real accuracy?

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"Carbondale_Mike" <mmiller[at]sopris.net> wrote:

- quote -

if they were publicly traded stocks, prices might be listed
in the wall street journal (or some other source)

if so, locating old copies of the wsj might mean a trip to a
local library or other source of old wsj

unless the irs specifically asks for it or is examining 2002
and 2003, substantiation of purchase prices reported on
schedule d within the form 1040 is not generally included
with the return(s) when filed; one critical issue is to make
sure the total of sales prices shown on schedule d adds up
to the forms 1099-b total

consider getting irp (information return printout)
transcripts from the irs with all the 1099-b data to
minimize or eliminate matching problems as to the sales
prices

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Carbondale_Mike wrote:

- quote -

This may help?

Capital Changes Reporter to the Rescue
As far as I know, there's only one authoritative source for
capital-changes information. Tax and business law publisher CCH puts
out a set of books called the Capital Changes Reporter. (It's also
available on CD-ROM and via Internet-based subscriptions.) You can look
up the company in question and trace all the capital changes over the
years.

For example, anyone who bought Microsoft when it went public in 1987
probably can't even guess how many times the stock has split. If you
look it up in the Reporter, you'll find seven 2-for-1 splits and a
couple of 3-for-2 splits since day one. (Additional splits may have
occured by the time you read this.) So you take the donor's original
per-share cost and divide by 288 to arrive at the per-share basis of
Microsoft stock received by gift today. (Holy smokes, that was a good
investment!)

So where can you find the Reporter? Not at Barnes & Noble. This is a
highly specialized (and expensive) publication. However, according to
CCH Editor Denise Davidson (whose assistance was invaluable in writing
this), you should be able to track down a copy at public libraries in
big cities and good law-school libraries. Offices of the big national
and regional CPA firms should also have one for their tax staff. Like
me, most CPAs are nice. If you grovel pitifully, you will probably be
invited in to use their Reporter free of charge.

Full-service brokers should also subscribe, often via fax or the
Internet. But good luck getting your broker to do the research, unless
you are an important (and very insistent) customer. So if you live
outside the big city, a road trip may be necessary.

Shares You Acquired Yourself
If you have lost the basis records for shares you yourself purchased,
shame on you! However, you are obviously not alone. If you were, the
Capital Changes Reporter would not exist, and guys like me would be out
looking for a real job. Just follow the same procedure explained above
for shares received by gift.

Old Share Certificates
Now let's say you find or inherit some dusty, old stock certificates.
If the company is still publicly traded, follow the steps outlined
earlier, including a check of the Capital Changes Reporter. You could
discover you are theoretically entitled to some additional shares,
because of splits or spinoffs. However, as I warned above, the state
may become the owner of unclaimed assets after a period of time.
Contact the company's investor relations department and ask what your
rights are.

If the shares are in a now-defunct corporation, you could still be in
luck. It may have merged with another still-standing publicly traded
company. Again, you can find out by checking the Capital Changes
Reporter. For example, if you look up American Motors, you'll see it
merged into Chrysler in 1987. American Motors shareholders received
Chrysler stock in the deal. Of course, Chrysler has since merged with
Daimler-Benz. You may be entitled to stock in the new company.

The Reporter also lists worthless securities going back forever. If
your funky old shares fall into this category, the owner should have
taken a worthless stock deduction (treated as a capital loss) in the
year the company went belly up. If that owner was you, the loss is
equal to your basis in the worthless shares. The good news: If you
failed to take a deduction in the year of worthlessness, you have seven
years from the due date for that year's return to claim a refund by
filing an amended return. If the seven years are up, you are out of
luck. Sorry about that.

Shares in an IRA
If your shares are held in an IRA or qualified retirement account, you
don't need to go searching through the Capital Changes Reporter. The
only relevant number is your basis in the account from any
nondeductible contributions. For traditional IRAs, you can find this
amount on your latest Form 8606 (if you've been filing correctly). For
company plans, your basis should appear on your statement. All your
withdrawals beyond your basis are taxed as income (except for Roth IRA
payouts).

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

A prospective client has been asked to file his 2002 and
2003 tax returns. They noticed that along with moderate W-2
earnings, he also had several millions in stock trades as
reported to them on 1099Bs. He was daytrading at the time
and did not keep records of his purchases. Further the
online brokerage he used has been bought up by another
brokerage, but records from that time only cover sales info
and no cost information. There are hundreds of trades and
certainly many wash sales. He also says he knows how much he
netted during that time. Any suggestions as to what the IRS
might accept in reporting this?

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >