Title

Average Cost Basis and Compliance Complexity

Document Type

Article

Publication Date

12-9-1996

ISSN

1048-3306

Publisher

Tax Analysts

Language

en-US

Abstract

When the second Clinton administration submits tax recommendations to Congress in 1997, it probably will recycle some of the proposals it made earlier this year. One likely candidate concerns the determination of adjusted basis for substantially identical securities. 1 This viewpoint gets a head start in evaluating the administration's proposal. 2

The federal income tax establishes a general framework for the taxation of profits from appreciation in investments. It allows investors to defer recognition of gain until a realization event occurs. If the investment property constitutes a capital asset and if the investor has held the property long enough, now more than one year, the gain constitutes long-term capital gain and receives more favorable tax treatment than other income. Investors suffer restrictions on the deduction of losses on capital assets. Scholars have debated the merits of each of these elements and this report will not revisit those discussions. 3

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