Cost Basis of Stocks Can Vex Taxpayers

Investing provides substantial income for many taxpayers, but government auditors say the process of reporting such gains is costing the U.S. Treasury billions.

The problem, according to a June 2006 report from the Government Accountability Office, is taxpayer confusion related to the basis of securities. Based on 2001 data, the GAO found that 36% of taxpayers who sold securities that year misreported their capital gains or losses.

The problem in many cases, both in 2001 and today, is that taxpayers don't know the basis for their holdings or failed to adjust it properly.

If you're struggling with basis calculations as the 2007 filing deadline looms, you have a couple of options. And if Congress and the White House get their wish, brokers one day will be offering more help in determining securities' basis amounts.

Compiling Basis Data

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