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Home > Resources> White Papers

Learn about our Taxable Events Webinars.


Welcome to our White Papers Section

Our white papers offer tax practitioners and compliance officers practical guidelines on how to implement different cost basis calculation methods — all while remaining compliant with the Internal Revenue Code (IRC) and Cost Basis Reporting (CBR) regulations. This section includes papers about different taxable events, including wash sales / I.R.C. 1091, tax straddles / I.R.C. 1092, constructive sales I.R.C. 1259, and qualified dividends / I.R.C. 1(h)(11). Our papers also discuss important concepts, such as substantially identical securities and offsetting positions that are found in the different sections of the IRC.


Cost Basis Reporting
Phase III Cost Basis Reporting: Intermediate Bond Math. by William Fang with George Michaels and Daniel Tilkin.

This paper builds on our earlier white paper on this topic, Phase III Cost Basis Reporting: Basic Bond Math and offers an intermediate-level discussion of the bond math necessary to calculate cost bases for less-complex fixed income / bonds.

It covers key aspects of the Internal Revenue Code (IRC) regulations that govern debt securities and discusses topics including de minimis rules for amortization, elections, bond premium and bonds with call or put features. The paper also uses examples of securities transactions to illustrate how to accurately calculate bond cost bases.     04/2015
Phase III Cost Basis Reporting: Basic Bond Math. by William Fang with George Michaels and Daniel Tilkin.

This paper explains specific elements of basic bond mathematics necessary to create and / or read 1099-B, 1099-INT, and 1099-OID statements compliant with Phase III of the Cost Basis Reporting regulations.

The paper focuses on long-term debt issued in 1985 or onward and covers basic or non-OID (Original Issue Discount) and OID bonds. It includes many examples and a spreadsheet that details how each example is calculated.     12/2014
Phase III Cost Basis Reporting: The Basics*. by William Fang with George Michaels and Daniel Tilkin.

Per the final phase of the Cost Basis Reporting requirements, brokers and other transfer agents must report a customer's adjusted basis for certain covered securities -- securities futures contracts, debt instruments and options -- acquired on January 1, 2014 or later. They are also required to classify any gain or loss as long-term or short-term for these covered securities.

This paper focuses on how to comply with Phase III requirements when generating 1099-B statements; it supplies examples of cost basis calculations for securities futures contracts, different options and covered debt instruments and provides instruction on how to complete 1099-B forms for these securities. The paper also covers amortization rules, which can make calculating cost basis for debt instruments highly complex.

Section 6 "Investor Election" was updated per CBR regulation updates (April 2014).     Originally published on 09/04/14
Phase III Cost Basis Reporting: A Guide to Complying with Expanded Transfer Statement Information Requirements*. by George Michaels with William Fang and Daniel Tilkin.

According to the Transfer Statement Enhanced Information Requirements, when a broker transfers certain securities futures contracts, debt instruments, and options (as defined by 1.6045-1(a)(18)) to another broker, key pieces of data must be reported to the receiving broker. This reporting is mandatory for transfers on or after January 1, 2015, when the securities are acquired after January 1, 2014. This paper serves as a guide on how to comply with this third and final implementation phase of CBR reporting law.

*The Options and Debt Instruments sections of this paper have been updated per CBR regulation updates (April 2014).     Originally published on 07/11/14
1099-B Statements and Cost Basis Reporting. by George Michaels.

A comprehensive review of what brokers need to know and how to prepare for the new cost basis reporting requirements.    10/14/09
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Constructive Sales
Advanced Topics in Constructive Sales: The Exceptions. by George Michaels with William Fang and Daniel Tilkin.

This paper discusses two key exceptions to the Constructive Sale rule — the Closed Transaction Exception and Serial Hedge Exception — and uses many examples to show how to interpret and implement them when calculating realized gains & losses on investment portfolios.     04/24/14
Constructive Sales. by George Michaels with William Fang and Daniel Tilkin.

This paper discusses the history and applications of Section 1259, the Internal Revenue Code (IRC) that governs tax treatment for constructive sales. In addition to addressing how to identify constructive sales, the paper also discusses other important topics, including the similarities between cost basis adjustments for constructive sales and wash sales. Examples are included.    8/09/12
Using Market Risk Concepts to Refactor Tax Shelters. by George Michaels and Daniel Tilkin.

This paper asserts that the vague language behind the Internal Revenue Code (IRC) sections that address tax shelters — wash sales, straddles, constructive sales, qualified dividends and short sales — can be made easier to understand and thus easier to follow by using ideas and terms from the market risk lexicon. It offers an alternative definition of the elusive term, ‘substantially identical.’ In addition, it discusses the commonalities between ‘substantially identical’ and ‘offsetting position’ and proposes that these concepts be combined into a single term.     6/11/12
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Private Wealth Management
Opportunity Knocks: Private Wealth Managers and Proactive Tax Services — Lessons Learned from the Hedge Fund Industry. by Brian Roberti.

This paper discusses how the adoption of alternative investment strategies by private wealth managers requires sophisticated tax analyses functionality and offers lessons learned from the hedge fund industry.    11/13/12
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Qualified Dividends
Using Market Risk Concepts to Refactor Tax Shelters. by George Michaels and Daniel Tilkin.

This paper asserts that the vague language behind the Internal Revenue Code (IRC) sections that address tax shelters — wash sales, straddles, constructive sales, qualified dividends and short sales — can be made easier to understand and thus easier to follow by using ideas and terms from the market risk lexicon. It offers an alternative definition of the elusive term, ‘substantially identical.’ In addition, it discusses the commonalities between ‘substantially identical’ and ‘offsetting position’ and proposes that these concepts be combined into a single term.     6/11/12
Qualified Dividend Income. by George Michaels and Daniel Tilkin.

Complete with examples, this paper discusses the interaction of constructive sales and straddles on dividends and how to determine whether or not a dividend qualifies for a lower tax rate.     10/28/11
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Tax Straddles
Using Market Risk Concepts to Refactor Tax Shelters. by George Michaels and Daniel Tilkin.

This paper asserts that the vague language behind the Internal Revenue Code (IRC) sections that address tax shelters — wash sales, straddles, constructive sales, qualified dividends and short sales — can be made easier to understand and thus easier to follow by using ideas and terms from the market risk lexicon. It offers an alternative definition of the elusive term, ‘substantially identical.’ In addition, it discusses the commonalities between ‘substantially identical’ and ‘offsetting position’ and proposes that these concepts be combined into a single term.     6/11/12
Tax Implications of Straddles. by George Michaels and Daniel Tilkin.

This paper discusses two issues integral to cost basis calculations: (1) how to calculate taxable gains and losses for straddles transactions, per Section 1092 of the tax code, and (2) how to account for the effects of other taxable events, such as wash sales, on straddles and vice versa. Examples are included.     2/15/12
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Wash Sales
Advanced Topics in Wash Sales: Substantially Identical Bonds. by George Michaels with William Fang and Daniel Tilkin.

This paper discusses certain IRS and Tax Court rulings as well as the Code of Federal Regulations to illustrate the government’s thinking on the interaction between 1091(a) wash sales and debt securities with specific attention paid to how substantially identical applies.     10/10/13
Basic Wash Sales. by George Michaels with William Fang and Daniel Tilkin.

This paper serves as an introduction to wash sales. It includes examples on how to identify this taxable event and calculate accurate taxable gains and losses.     12/12/12
Using Market Risk Concepts to Refactor Tax Shelters. by George Michaels and Daniel Tilkin.

This paper asserts that the vague language behind the Internal Revenue Code (IRC) sections that address tax shelters — wash sales, straddles, constructive sales, qualified dividends and short sales — can be made easier to understand and thus easier to follow by using ideas and terms from the market risk lexicon. It offers an alternative definition of the elusive term, ‘substantially identical.’ In addition, it discusses the commonalities between ‘substantially identical’ and ‘offsetting position’ and proposes that these concepts be combined into a single term.     6/11/12
Wash Sale Implications of Short Sales. by George Michaels with Daniel Tilkin and Jonathan Davis.

This paper discusses how Holding Periods, Delivery Wash Sales and Constructive Sales impact the highly complex and confusing process of determining whether or not a short sale will result in a wash sale. Through the use of examples, it aims to clarify the ambiguous IRS tax code on this subject.     09/30/11
Prospective Wash Sales. by George Michaels with Daniel Tilkin.

Data on prospective wash sales can play a vital role in a tax-aware portfolio management strategy. This paper discusses the two types of events that can result in a prospective wash sale and provides examples to illustrate how to identify these tax events.    08/15/11
Holding Period Adjustment Methods for Wash Sales. by Charles Saluti with Daniel Tilkin and Gregory Hoch.

When determining holding period adjustments as a result of wash sales, three methods can be used. This paper explores the intricacies involved in executing each method and pays special attention to ‘chained’ wash sale cases.    07/25/11
Wash Sale Concerns for Mutual Funds & DRIPs. by Atishe Chordia with Anthony Breen and Daniel Tilkin.

Mutual fund securities and dividend reinvestment plans acquired on or after January 1st, 2012 must include wash sales in cost basis calculations reported on 1099-Bs. Replete with examples of complex wash sale scenarios, this paper addresses critical issues involved in meeting this new cost basis reporting regulation.    06/06/11
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