Additional Resources

New Regulations Will Help You Accurately Report Gains & Losses
Beginning with the 2011 tax year, the IRS is requiring all financial institutions to report adjusted cost basis (in addition to gross proceeds) for covered securities and whether the related gain or loss is long-term or short-term.

What Are Covered Securities?
Covered securities are any securities that are purchased or acquired on or after the legislation effective dates. Non-covered securities are those purchased or acquired before the effective dates.

Different securities will become covered in different years:

• Equities. Equity securities are covered securities if they are purchased or acquired on or after Jan. 1, 2011.
• Mutual funds and dividend reinvestment plan (DRIP) shares. These types of investments are covered if they are purchased or acquired on or after Jan. 1, 2012.
• Other specified securities, including fixed income and options. Investments in this category will be covered if purchased or acquired on or after Jan. 1, 2013.

Tax Lot Relief Methods
To help you manage the tax consequences of your trading activities, H.D. Vest is making a number of new “tax lot relief methods” available. A tax lot relief method is a way of computing the realized gain or loss for an asset sold in a taxable transaction. It determines which lot of a security as well as its associated cost basis and holding period are used in computing the gain or loss.

H.D. Vest is offering nine different tax lot relief methods:

• First In First Out
• Last In First Out
• Highest In First Out
• Lowest Cost First Out
• Highest Cost Short Term
• Highest Cost Long Term
• Lowest Cost Long Term
• Lowest Cost Short Term
• Minimum Loss Minimum Gain (available later in 2011)

Learn more about the different tax lot relief methods and how to identify specific tax lots in our accompanying guide, “New IRS Cost Basis Reporting Rules.” Each tax lot relief method has its tax advantages and disadvantages, and you can select different methods for different accounts as well as for individual transactions if you so choose. Talk with your tax advisor to determine which methods are most appropriate for your situation.

Note: In the event you do not specify a tax lot relief method, H.D. Vest default tax lot relief method is the First In First Out (FIFO) method.

First Things First
Talk with your H.D. Vest Advisor to learn more about how this new legislation affects you, and talk with your tax advisor to determine which tax lot relief methods are most appropriate for your situation.

H.D. Vest Financial Services^® does not render legal or tax advice. Although this information is not intended to replace discussions with your tax advisor, it may help you comprehend the tax implications to your investment plan effectively going forward.