2008 Tax Guide (8.56MB)

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Items That We Are Required to Report to the IRS
Liquidation Distributions Generally, liquidation distributions are treated as amounts received from the sale or exchange of a capital asset and should be reported on IRS Form 1040, Schedule D, as either a short-term or long-term capital gain or loss. Please review liquidation distributions with your tax professional since the tax consequences may vary based on the nature of the distribution.   Substitute Payments in Lieu of Dividends or Interest (IRS Form 1099-MISC) The amounts in this section reflect substitute payments in lieu of dividends or interest credited during 2008. These amounts were allocated to an account pursuant to IRS regulations and represent amounts we received on your behalf as a result of the deemed transfer of securities for use in a short sale. These amounts should be reported as other income on tax returns. We report this item on IRS Form 1099-MISC (Miscellaneous Income).     Royalties   The amounts in this section reflect income earned from royalty trusts in 2008. These amounts should be reported on IRS Form 1040, Schedule E. We report this item in IRS Form 1099-MISC.		Foreign Tax Paid Your Tax Information Statement may include foreign tax paid (withheld) from dividends and interest from foreign sources credited to your account in 2008. This information allows you to calculate a foreign tax credit or deduction on your tax return. The rate of foreign tax paid varies from country to country and according to applicable income tax treaties. A foreign tax credit can be claimed either on IRS Form 1116 (Foreign Tax Credit) or, in some circumstances, by reporting it directly on IRS Form 1040, line 47. A foreign tax credit may be claimed only if the tax was legally owed and not eligible for refund. A deduction can be claimed on IRS Form 1040, Schedule A (Itemized Deductions), line 8. Foreign tax paid is reported in the 1099-INT and 1099-DIV sections of your Tax Information Statement. You should combine these amounts to determine your total foreign tax credit or deduction. If you elect to take a foreign tax credit on your 2008 tax return, please be aware that qualified dividends may have to be adjusted by 42.86% when determining foreign source income on IRS Form 1116. See the instructions to IRS Forms 1040 and 1116 for more information about foreign tax credits and deductions, and reporting qualified dividends when figuring your foreign tax credit.

Items That We Are Not Required to Report to the IRS
Partnership Cash Distributions We report partnership cash distributions in this section of your Tax Information Statement. We do not report this information to the IRS. Although you are not required to report partnership cash distributions on your tax return, this information is useful because partnership cash distributions generally reduce the tax basis of your investment in a partnership. A disposition of your interest in a partnership is generally reflected as proceeds from securities transactions in the 1099-B section of your Tax Information Statement and is reported by us to the IRS. Accounts that held partnership interests will receive their tax information directly from the partnership on IRS Form 1065, Schedule K-1 (Partner’s Share of Income, Credits, Deductions, etc.). Contact the partnership directly if you do not receive this form.   Trust Distributions Trust distributions include payments from publicly-traded trusts. Please contact the trust’s accountants directly for IRS Form 1041, Schedule K-1 (Beneficiary’s Share of Income, Deductions, Credits, etc.), which reflects your share of the trust’s taxable income or loss.   Return of Principal Distributions Generally, the return of principal distributions is not taxable, but will reduce the tax basis of your bond. However, in certain circumstances, a portion of the distributions may be reportable as taxable income. We report a bond’s final principal distribution in the 1099-B section of your Tax Information Statement, and we also report it to the IRS.   Equity Options Transactions If you traded or held equity options during 2008 in your brokerage account, we reported certain activities (for instance, sales, purchases, exercises, expirations, and assignments) related to those options in this section. We do not report this information to the IRS. The closing of an equity options transaction is typically reportable as a capital gain or loss on IRS Form 1040, Schedule D (Capital Gains and Losses). The tax rules governing equity options are complex. We suggest you carefully review these rules with your tax professional.		Securities Purchased Securities purchased through your brokerage account in 2008 are displayed in this section. We do not send this information to the IRS. We provide this information to you because you will need it to calculate gain or loss upon disposition of the securities. Please note the following:     NET COST: The net cost displayed includes commissions and fees. If the security purchased is a debt instrument, the net cost does not include accrued interest purchased. Accrued interest purchased is reported separately in this section of your Tax Information Statement. The cost of securities purchased during 2008 should be reported on your tax return in the year the securities are sold on IRS Form 1040, Schedule D (Capital Gains and Losses). SECURITIES: Various types of securities purchased, such as stocks and debt instruments, are included in this section. TRADE-DATE: We report the securities you purchased on a trade-date basis. ACCRUED INTEREST PURCHASED: Your Tax Information Statement includes details of accrued interest purchased for various categories of notes and bonds purchased between interest payment dates. We do not report accrued interest purchased to the IRS. Accrued interest purchased is generally a reduction of interest income in the year in which the related interest income is reported. The Tax Information Statement includes accrued interest purchased with respect to all 2008 note and bond purchases on a settlement-date basis. If you purchased a note or bond with accrued interest in 2008, whose initial interest payment was reported by us in 2008, you should adjust your 2008 interest income by the accrued interest purchased, as reported on your 2008 brokerage confirmation or 2008 Tax Information Statement. Taxable amounts of accrued interest purchased should be reflected on IRS Form 1040, Schedule B (Interest and Ordinary Dividends), line 1, as a reduction of interest income. Identify this reduction of interest income as accrued interest. The nontaxable amounts should reduce the appropriate nontaxable income categories..