A NetBasis cost basis report is a $35 automated reconstruction of the adjusted cost basis of a single security, built by running your purchase and sale dates against a database of historical prices, corporate actions, SEC filings, and proxy statements. It’s worth ordering when you sell shares your broker didn’t have to track for you and your own records are incomplete. The most common situations are pre-2011 stock that has been through spin-offs, mergers, or splits; long-held dividend reinvestment plan positions; and inherited securities where nobody documented the date-of-death value.
When You Actually Need One
Brokerages report cost basis to the IRS on Form 1099-B only for “covered securities.” Anything acquired before the coverage date is a “noncovered security,” and when you sell noncovered shares the 1099-B shows the proceeds with the basis box blank or marked as not reported to the IRS. Figuring out and reporting the correct basis is your job.
The coverage cutoffs are:
- Stocks purchased for cash: covered if acquired after 2010.
- Mutual fund shares and stocks eligible for average basis: covered if acquired after 2011.
- Most debt instruments and options: covered if acquired after 2013.
- More complex instruments such as convertible bonds and contingent payment debt: covered if acquired after 2015.
Brokers may still display a basis figure on statements for noncovered lots, but they have no obligation to get it right. Vanguard, for example, notes that it may only have average cost information for noncovered mutual fund shares and that investors are responsible for reporting basis according to their own records.
A NetBasis report earns its fee when a noncovered position has been touched by events that shift basis and you can’t cleanly reconstruct them yourself. Typical triggers:
- A stock bought decades ago that has been through multiple splits, one or more spin-offs, or a merger that paid part cash and part stock.
- A dividend reinvestment plan position where every quarterly reinvestment is a separate lot with its own date and price, sometimes 80 or more lots across 20 years.
- Inherited shares where you need to establish the stepped-up basis as of the date of death (or an alternate valuation date up to six months later if the executor elected it on the estate tax return). If you received a Schedule A to Form 8971 from the executor, your basis must match the value on it, and reporting a basis above the property’s final estate tax value can trigger an accuracy-related penalty.
A quick boundary: if all of your shares in the security were acquired after the applicable coverage date, your broker is already reporting basis to the IRS and you generally don’t need a separate report.
What the Report Actually Does
You give NetBasis the security name or ticker, the purchase date, the number of shares acquired, and the sale date. The software identifies every corporate event that occurred between those two dates and applies each adjustment in sequence.
For nontaxable stock dividends where the new shares are identical to the old, it divides your original basis across the combined share count, following the allocation method in IRS Publication 550. When the new stock is not identical to the old, basis is allocated between the two based on relative fair market values on the distribution date. For mergers, the system pulls the original proxy statement and registration filing to determine how much of the transaction was taxable versus tax-deferred, then allocates your pre-merger basis accordingly, accounting for any taxable “boot.”
The output shows your original purchase price, lists every corporate action applied chronologically, and arrives at an adjusted cost basis figure. That’s the number you use to calculate capital gain or loss on the sale.
How to Use the Number on Your Return
Report the sale of a noncovered security on IRS Form 8949. Because the broker did not report your basis to the IRS, check Box B for short-term sales or Box E for long-term sales. Enter the adjusted basis from your NetBasis report in column (e). The gain or loss flows from Form 8949 to Schedule D.
If you leave the basis blank or report zero because you lack records, the IRS treats the entire sale proceeds as taxable gain. That’s legal but almost always overstates what you owe. On a position held for decades, the tax difference between a zero basis and the real one can be enormous, which is why a $35 report tends to pay for itself many times over on a single sale.
What It Costs
NetBasis charges $35 per report, and each report covers one security. Many large brokerages license the technology and offer it to clients directly, sometimes at a reduced price or bundled with other services.
The fee is not deductible on your federal return. The Tax Cuts and Jobs Act suspended the deduction for miscellaneous itemized expenses, including investment-related costs, starting in 2018, and that suspension has since been made permanent. There is no federal deduction for cost basis reconstruction fees.
When NetBasis Cannot Help
The database is broad but not infinite. If the company was small, delisted decades ago, or involved in obscure transactions, the historical data you need may not be there. At that point you’re looking at manual reconstruction.
Start with the brokerage. Ask for the full transaction history for the account, including data that may not appear in the online portal. If the firm has been acquired, the successor may still have archived records. Old account statements, trade confirmations, and prior tax returns showing dividend income can each fill in a piece of the history.
If records are genuinely unavailable, the IRS expects a reasonable reconstruction effort, documented well enough to hold up under review. Historical stock price databases, old annual reports, and dividend payment records can supply supporting evidence. Document every assumption and every source. A CPA experienced with securities can do this work, though hourly rates commonly running several hundred dollars make it considerably more expensive than an automated report.
Reporting a basis of zero is always available as a last resort. You’ll pay tax on the full sale amount, which eliminates any risk of underreporting, but for a long-held position with a meaningful original investment the cost of that safety is steep.
How Long to Keep the Report
Keep the NetBasis report and any supporting documentation for at least three years after you file the return reporting the sale. That’s the standard IRS audit window. If you underreport income by more than 25% of the gross income shown on your return, the window extends to six years. If you never file a return, there is no expiration.
The IRS specifically advises keeping cost basis records until the statute of limitations expires for the year you sold the asset. Holding onto the report indefinitely costs nothing and removes any risk of being unable to substantiate the number later.