Account Value, Profits, and Losses

What this video covers

• The difference between realized gains and losses (actual sale, taxable) and unrealized gains and losses (paper, not yet taxable)
• Why periodic account statements show current market value and unrealized positions, not taxable events
• What Form 1099-B reports, and why only realized gains and losses land on it
• How cost basis works as the IRS starting line for computing gain or loss when a covered security is sold
• The mandatory cost basis reporting dates: January 1, 2011 for stocks and January 1, 2012 for most other securities (bonds, options, mutual funds)
• The exam trap where a customer's portfolio has appreciated significantly but no sale has occurred, so no tax is owed
• How broker-dealers (BDs) must report cost basis to both the customer and the Internal Revenue Service (IRS) for covered securities