These regulations took effect over a three-year phase-in period that began in 2011. During this period, different types of securities have become "covered" and subject to new Form 1099-B cost basis reporting to the IRS and to clients. In general, the phase-in of the various types of securities began as follows:
- Equities — acquired on or after January 1, 2011
- Mutual funds or shares acquired in connection with DRIPs — acquired on or after January 1, 2012
- Options and certain bonds acquired on or after January 1, 2014
- Complex bonds and options issued as part of a fixed income instrument acquired on or after January 1, 2016
A security that has been transferred to your account from another brokerage account in which the security was already "covered" is considered a covered security. As required by cost-basis reporting regulations, when you sell covered securities we will report to the IRS and to you not only the gross proceeds from the sale, but also the adjusted cost basis, the date of acquisition, whether any gain or loss with respect to such securities is long-term or short-term, and whether a portion of the gain is ordinary income.