To download the Tax Guide, please read the information below and then check the box to affirm that you have done so. The link to download the Tax Guide will then appear:

If you held a mutual fund, real estate investment trust (REIT), widely held fixed investment trust (WHFIT), widely held mortgage trust (WHMT) or unit investment trust (UIT) in 2014, we may send you a revised tax information statement. Please be aware that some issuers do not make their final distribution information available until after January. See the Dividends and Distributions section of the 2014 Tax Guide for more information.

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What’s New for 2014 Tax Reporting

  1. Mailing Dates for Your 2014 1099 Tax Statement*

    Pershing will begin mailing tax information statements/Forms 1099 by January 31, 2015. When you receive your statements/Forms 1099 depends on the holdings in your account.

    Special Note Regarding Debt Instruments:
    Debt instruments (bonds) purchased in 2014 are now covered under cost basis regulations. If you purchased bonds in 2014, your Form 1099 may report additional information for these investments. Due to the complexity of these tax rules, we will mail bond information no earlier than February 17, 2015.

    Please refer to the information below for additional details:

    Phase Date Statement Mailing Details
    1 January 31 Forms 1099 will be mailed for accounts with holdings and income that typically do not require reclassification or additional information from issuers. Generally, this includes accounts holding equity-only investments and options.
    2 February 17 Generally, this mailing includes mutual funds, certain unit investment trusts (UITs), real estate investment trusts (REITs) and certain equities, because the issuer provided final tax information after the January 31 mailing was prepared.

    If you hold positions for which issuers have not provided final tax information for 2014, you will receive a special Pending 1099 Notice. This will identify the holdings impacting the mail date for your Forms 1099 and provide the anticipated mail date for your forms. If you have already received your Forms 1099, you will not receive this notice.
    3 February 28 Forms 1099 will be mailed for accounts for which income reclassifications were received after the February 17 mailing was prepared. Generally, this includes remaining mutual funds, REITs and certain equities.
    4 March 16 Forms 1099 will be mailed for all remaining accounts, including those holding certain complex, non-equity securities, such as real estate mortgage investment conduits (REMICs), widely held fixed investment trusts (WHFITs) and some UITs.
    * Note: Dates are subject to change. Holding the types of securities noted does not guarantee that your tax statements will be mailed on the indicated dates. Financial organizations, like Pershing, are responsible for Form 1099 reporting and must rely on issuers of securities for your tax information. Pershing’s annual practice is to request and obtain an extension from the IRS for the February 15 date on which we are required to mail IRS Forms 1099 (B, DIV, INT, OID and MISC). In anticipation of obtaining this extension—and since February 15, 2015, falls on a Sunday and the President’s Day holiday is observed on Monday, February 16—the second phase of the mailing will be completed by February 17. Pershing’s 30-day extension to the mailing requirement will accommodate the third and fourth phases of the mailing. March 15 falls on a weekend, so the final mailing will be completed the next business day, March 16.

    Corrected 1099 Forms Will Be Mailed as Needed

    You may receive a corrected tax information statement/Form 1099. There are several reasons for this—for example, issuers of securities held in your account may provide updated or additional information after your Form 1099 is mailed to you. The IRS requires financial organizations to send corrected forms with revised information as needed. Please note that financial organizations, like Pershing, are responsible for Form 1099 reporting and must rely on issuers of securities for your tax information.

    Next Steps:
    No action is required. Your 1099 tax statement will be mailed as soon as it is available. For faster access, consider enrolling in electronic delivery (e-delivery). When you enroll in e-delivery, you can view your tax documents as soon as they are available. Contact your financial organization about your mail delivery preferences. View additional information on Going Paperless.

    Additional Resources:
    Please view this supplemental document that details the phased mailing schedule.

    Enhanced 1099 Form and Tax Information Statement

    New enhancements have been made to your 2014 tax information statement, which includes the 2014 substitute Form 1099-B. To learn more about these changes, you can view our sample tax statement.

    Next Steps:
    If you have questions related to Form 1099, please consult your tax professional.

  2. What’s New for Cost Basis Reporting and Bonds?

    For the 2014 tax season, cost basis reporting requirements now apply to some debt instruments and options, plus stocks and mutual fund shares. When you file your federal income tax return, you are still required to provide the cost basis (including all gain and/or loss information) for all reportable (covered) investments disposed of by sale, exchange or redemption in your tax filing for the tax year in which the disposition occurs.

    Securities are considered “covered” if they are acquired on or after their applicable January 1 effective date and “noncovered” if they are acquired before their covered effective date. As an example, covered securities’ cost basis information will be reported to the IRS when sold, exchanged or redeemed, and noncovered securities and their cost basis information will not be reported to the IRS. Please note the following IRS timetable for cost basis reporting:

    • January 1, 2011—Stock in a corporation
    • January 1, 2012—Mutual fund shares, including eligible DRP shares and ETFs that are treated like mutual funds
    • January 1, 2014—Less complex bonds and options
    • January 1, 2016—More complex debt instruments, including bonds with more than one rate, convertible bonds, stripped bonds or stripped coupons, payment-in-kind (PIK) bonds, foreign debt, foreign currency debt, some private issues and physical certificates

    Next Steps:
    Please refer to the IRS website for additional details about cost basis reporting requirements.

  3. Importance of Reviewing Account Elections for Bonds

    If you hold covered debt instruments (bonds) or options, there will be important changes when you file your 2014 federal income tax return. On January 1, 2014, the new tax rules required financial organizations to report the original or adjusted purchase price (cost basis) to you and the IRS when covered debt instruments and options are sold, exchanged or redeemed. As a result, if you purchased these instruments anytime in 2014, you will see the cost basis of these investments reported as covered securities on your 2014 Forms 1099 for the first time.

    Financial organizations, such as Pershing, added the IRS defaults (see below table) at the account level and began displaying these defaults on your account statement last year.

    For the 2015 tax year, the deadline for notifying the IRS of your debt instrument (bond) elections for your account is December 31, 2015. Before this date, please review your account elections for bonds. If you have changes, you must provide specific instructions to your advisor before December 31, 2015. After that date, any changes will be applied beginning 2016.

    Please note: For the 2014 tax year, the deadline for notifying the IRS of bond elections was December 31, 2014. While the deadline has passed, please be sure to set up your account elections for bonds for the 2015 tax year.

    Next Steps:

    1. Review your taxable bond holdings with your tax professional before December 31, 2015.
    2. Notify your advisor in writing, before December 31, 2015, of the elections you made with the IRS. This will allow your account to be properly set up to comply with cost basis reporting requirements for bonds for 2015. Per IRS requirements, your financial organization will assume that you have elected to amortize bond premiums, unless written instructions are provided. If you are making changes, your financial organization should be able to provide an election document. If your financial organization does not offer one, a sample election document is available for download.**
    3. Learn about all available cost basis elections and accrual methods for bonds (see table below).

    Additional Resources:
    Please download this sample Debt Instrument Election and Accrual Method document.

    This sample election document is provided by Pershing and not the IRS. This document contains debt instrument election and accrual method information and was designed to help you notify a broker of the elections or revocations you have made directly with the IRS. Due to the complexity of bond elections and accrual methods, you are strongly encouraged to consult your tax professional to determine which methods best meet your tax situation.

    Cost Basis Elections and Accrual Methods for Bonds

    The chart below outlines cost basis bond elections and provides a brief description of each accounting method.

    Elections Description
    Amortization Bond Premium (per §171 and §1.171-4 of the Internal Revenue Code [IRC]) The IRS requires financial organizations to assume you have made this election. The election requires Pershing to amortize your taxable premium each year and apply the premium as a reduction to your taxable interest income. Your cost basis will be adjusted for the amortization.

    If you choose not to apply this election, you must notify your financial organization in writing and Pershing will not report your amortization as an offset to income and will not make amortization-related adjustments to your cost basis.

    Note: Tax-exempt bonds must be amortized.
    Current Inclusion
    To include accrued market discount as income annually (per IRC §1278[b])
    The default is to not report the accrued market discount annually as income. It also does not allow the financial organization to adjust the cost basis for the accruals.

    You may make this election with the IRS and notify your financial organization in writing if you want to report the market discount annually as income.
    Constant Yield
    To accrue market discount based on a constant yield (per IRC §1276[b][2])
    The default uses the straight line/ratable method when calculating market discount.

    You may make this election with the IRS and notify Pershing in writing if you want to calculate market discount accruals using the constant yield.
    Original Issue Discount (OID)
    To treat all interest as OID (per IRC §1.1272-3)
    This election is generally made instrument by instrument. However, this election assumes the constant yield and current inclusion elections have been made and consolidates all payments. Also, interest income is reported at the accrual dates instead of payment dates even if the bond is in default.

    You may make this election with the IRS and notify Pershing in writing if you want to treat all interest as OID.

    Cost basis reporting requirements for more complex debt instruments become effective in 2016. Investments considered complex by the IRS include, but are not limited to, real estate mortgage investment conduits (REMICs), widely held fixed investment trusts (WHFITs) and unit investment trusts (UITs).

    **If you hold taxable bonds and need to make changes to your current account elections, the sample Debt Instrument Election and Accrual Method document describes the various elections and can be used to provide written instructions, per IRS requirements. You can complete the document and submit it to your financial organization (or advisor) for changing your current elections for the treatment of bond premiums and discounts. The document should be submitted to your financial organization only if you are making changes to your elections.

To learn more about any of the above topics, please download the Tax Guide.

This website is not intended to provide legal, tax, accounting or financial advice or services. We suggest that you consult your tax professional to discuss the appropriate federal, foreign, state and local tax treatment of your transactions. Any U.S. legal, tax, accounting or financial-related information contained in the Tax Guide, the Resources for Royalty Trust Tax Booklets or the Mutual Fund Supplemental Information was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in the Tax Guide, the Royalty Trust Tax Booklets or the Supplemental Information.

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