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Wolters Kluwer Adds Cost Basis Reporting for Debt and Options

Chuck Ross
General Manager, Investment Compliance Solutions
Wolters Kluwer Financial Services

Stevie D. Conlon
Senior Director and Tax Counsel
Wolters Kluwer Financial Services

Wolters Kluwer Financial Services has announced that its GainsKeeper tax lot accounting system now includes debt and options functionality for cost basis reporting phase 3 compliance.

On April 18, the IRS issued final  regulations for phase 3 reporting for debt, options and single stock  futures. This phase generally takes effect beginning Jan. 1, 2014, and  is widely recognized as the most difficult and complex of the three  phases of this law. More complex debt is subject to reporting beginning  Jan. 1, 2016. The rules require accommodating basis adjustment tax  calculations for Original Issue Discount (OID), bond premium and market  discount that must be integrated with other basis adjustments for  corporate actions and wash sales, as well as the lot relief rules for determining which positions are sold.

“Compliance with the cost basis reporting law requires the mobilization  of impacted organizations in order to deliver massive operational change  via significant technology upgrades efficiently,” said Chuck Ross,  general manager of Investment Compliance Solutions at Wolters Kluwer  Financial Services. “With this functionality, our clients will be  well-positioned to comply on time and to help their clients address even  the most complex cost basis reporting requirements.”
“GainsKeeper has released debt and options functionality, but some organizations might not fully appreciate that there are significant complexities in the tax rules and calculations applicable for reporting  of debt in particular,” notes Stevie D. Conlon, senior director and tax counsel, Wolters Kluwer Financial Services. “For example, corporate  actions affecting debt and the tax rules and customer elections that the regulations require brokers to accommodate in calculating OID market discount and bond premium for bonds will likely impose severe challenges for brokers. In addition, the difficulties in making the required calculations for more complex debt essentially mean that any broker or system that has not already begun developing these rules may be at risk  of not meeting the phase 3 requirements on time.”

About the Cost Basis Reporting Law
The cost basis reporting law was enacted in 2008 as part of the  Emergency Economic Stabilization Act and provided for a staggered  three-phase set of effective dates for different types of securities:  stock acquired on or after Jan. 1, 2011; qualifying mutual fund and  dividend reinvestment plan (DRP) shares acquired on or after Jan. 1,  2012; and debt instruments, options and other securities designated by  the IRS which per IRS Notice 2012-34 issued May 2, 2012, now has an  effective date of Jan. 1, 2014.

Whether complying with regulatory requirements, addressing a single key risk, or working toward a holistic risk management strategy, more than 15,000 customers worldwide count on Wolters  Kluwer Financial Services for a comprehensive and dynamic view of  risk management and compliance. Wolters Kluwer Financial Services  provides audit, risk, finance and compliance solutions that help  financial organizations improve efficiency and effectiveness across  their enterprise. With more than 30 offices in 20 countries, the company’s prominent brands include: FRSGlobal, FinArch, ARC  Logics for Financial Services, Bankers Systems, VMP Mortgage  Solutions, AppOne, GainsKeeper, Capital Changes, NILS, AuthenticWeb and Uniform Forms.

Wolters Kluwer Financial  Services is part of Wolters  Kluwer, a leading global information services and solutions provider with annual revenues of (2012) €3.6 billion ($4.6 billion) and  approximately 19,000 employees worldwide.

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