What is the new cost basis regulation?
On October 3, 2008, the required reporting of cost basis by financial institutions and brokers to the IRS and taxpayers became law. This was included in the Emergency Economic Stabilization Act of 2008.
What is changing?
Beginning with shares purchased on or after January 1, 2012 and subsequently sold (“covered shares”), OppenheimerFunds is required to report redemption and cost basis information for S corporations. The Act requires brokers and mutual funds to report sales of covered securities acquired by S corporations beginning on or after January 1, 2012. C corporations remain exempt from 1099 reporting.
What will OppenheimerFunds’ default cost basis reporting method be?
For covered shares, the default cost basis reporting method is Average Cost. We will not calculate cost basis for uncovered shares on S Corporations.
Are S corporations subject to 1099-B and cost basis reporting?
Yes, redemptions of covered shares purchased on or after January 1, 2012, are reported to the shareholder and the IRS on Form 1099-B.
What happens if a redemption transaction is comprised of both covered and uncovered shares?
The portion of the redemption that is covered shares is reported on Form 1099-B including the associated cost basis of those shares. Redemption proceeds on uncovered shares will not be reported on the 1099-B.
Will the redemption transaction reported on the confirm or statement match what is reported on Form 1099-B?
No, not necessarily. Only covered shares are reported on Form 1099-B.
Are S corporations subject to 1099-DIV reporting?
No, S corporations remain exempt from reporting.
Are C corporations subject to 1099-B and cost basis reporting requirements?
No, C corporations remain exempt from these reporting requirements.
What action is required?
A C corporation must certify its tax classification status as a C corporation on a Form W-9 and return it to us as soon as possible. These can be mailed to us or faxed to us at 303-768-1500.
How does a corporate entity determine if they are a C or S corporation?
OppenheimerFunds cannot assist in or make a tax classification determination for a corporate entity. Corporate entities must consult with their tax advisor.
What happens if a C corporation does not return Form W-9 to us?
These accounts will be defaulted to an S corporation status on January 1, 2012.
Are S corporations subject to backup withholding under the new rules?
Yes, redemption transactions will be subject to 28% backup withholding if the S corporation maintains a zero or uncertified TIN. Dividend and capital gain distributions remain exempt from 28% backup withholding.
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