Noncovered Securities
When your broker isn't required to report basis.
A noncovered security is one acquired before the mandatory reporting date for its type (for example, stock bought before 2011 or mutual fund shares bought before 2012; see the phase-in table). Shares can also be noncovered if they were transferred from an account without basis information, or acquired in certain other ways.
What changes when shares are noncovered
- On Form 1099-B, box 5 is checked, and the broker is not required to report basis to the IRS (it may show it to you anyway).
- On Form 8949, you report the sale in the category for transactions where basis was not reported to the IRS, and you enter your basis.
- Your basis is still whatever the tax law says; only the reporting differs. You must be able to support it.
Example: reconstructing basis
You sell 200 shares bought in 2008. The 1099-B shows proceeds of $9,000, no basis, and box 5 checked. Your old statements show a purchase for $3,950 plus a $10 commission, and a 2-for-1 split in 2014 doubled your 100 shares to 200. Basis = $3,960; gain = $5,040, long-term.
If you report $0 basis because the 1099-B was blank, you'd pay tax on the full $9,000.
Where to find old records
- Old trade confirmations and year-end statements, including from brokers that merged or were acquired.
- The company's transfer agent (for directly held shares and DRIPs).
- Historical prices and company Form 8937 filings for splits and spin-offs.
- For gifts and inheritances, the donor's records or the estate's valuation.
Pub. 551 explains that if you can't determine basis, the IRS may treat it as zero, so keeping records matters.
Sources
Last reviewed: November 2026