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Senate Committee Staff Releases Cost Basis Reporting Legislation Proposal Summary
On Friday, May 25, 2007, the staff of the Senate Finance Committee released its own cost basis reporting proposal (the "Senate Finance Staff Cost Basis Proposal")—both proposed bill language and a related technical explanation prepared by the Joint Committee on Taxation. 


There are now four different cost basis proposals: (1) the Simplification Through Additional Reporting Tax (START) Act, introduced by Senator Bayh of Indiana and other Senators and representatives in both the Senate and the House last year and again in February of 2007; (2) the proposal of the staff of the Joint Committee on Taxation delivered to the Senate Finance Committee in August 2006 (the "JCT Staff Cost Basis Proposal"); (3) the cost basis reporting proposal included in President Bush's fiscal 2008 budget released on February 5, 2007 (the "Administration Cost Basis Proposal"); and (4) the Senate Finance Staff Cost Basis Proposal.

Of course, only one version would ultimately be adopted if a cost basis reporting proposal is made law, and it is uncertain whether and to what extent such legislation would include any of the various components of  the four existing proposals.

The Senate Finance Staff Cost Basis Proposal is more detailed than the other proposals.  It includes proposed bill language and a technical explanation of the provision.  This is substantially more detailed than any of the explanations of the other proposals (only the JCT Staff Cost Basis Proposal could be considered comparable) and therefore provides additional insight regarding some of the details of the proposal.  By contrast, the Administration Cost Basis Proposal is described in only a single paragraph.

In many respects, the Senate Finance Staff Cost Basis Proposal appears to follow the Administration Cost Basis Proposal released in February.  Cost basis reporting would require brokers to report the holder's adjusted cost basis and holding period information for securities disposed or exchanged, and would apply to securities acquired by purchase, gift, inheritance or other means.  Cost basis reporting would apply to more than publicly traded stocks and bonds, mutual fund shares and SEC registered real estate investment trust (REIT) shares.  It would also apply to options, shorts, forwards, derivatives and partnership interests, provided they are publicly traded.  In a change from present law, the proposal would also provide that existing gross proceeds reporting rules and the proposed cost basis reporting rules would apply to options and for payments to corporate recipients.  The Senate Finance Staff Cost Basis Proposal would apply to securities acquired after the date that is 18 months after the date of enactment.

It is uncertain what form cost basis reporting legislation will ultimately take, or if such legislation will be enacted.  However, the release of Senate Finance Staff Cost Basis Proposal suggests that cost basis reporting legislation is gaining steam and its ultimate enactment into law could be inevitable, possibly happening later this year


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