How to Report 1099-B Undetermined Term Transactions

When your Form 1099-B shows an undetermined holding period, you are the one who has to figure out whether the sale was short-term or long-term, pin down the cost basis, and report the transaction on Form 8949 before the totals flow to Schedule D. This is how to report 1099-B undetermined term transactions: treat the broker’s blank classification as a signal that the security is noncovered, research the acquisition date and original cost yourself, and file the sale under Box B (short-term) or Box E (long-term) on Form 8949 with your calculated basis in Column (e). The work is yours because the broker was never required to track it.

Why Your 1099-B Left the Term Blank

Form 1099-B is the document brokers file to report proceeds from selling stocks, bonds, and other securities to both you and the IRS.¹ Box 2 is labeled “Type of Gain or Loss,” and the broker checks it to show whether the transaction was short-term, long-term, or ordinary.² If that box is blank or your statement calls the term “undetermined,” the broker simply didn’t classify it.

Check Box 5. When Box 5 is checked, the security is noncovered, and the broker is not required to report the cost basis (Box 1e), the acquisition date (Box 1b), or the type of gain or loss (Box 2).² The broker reports only the gross proceeds. You handle the rest.

A covered security is one acquired on or after specific dates that trigger mandatory basis reporting:³

Most corporate stock: acquired on or after January 1, 2011
Mutual fund shares and dividend reinvestment plan shares: acquired on or after January 1, 2012
Other specified securities such as bonds and options: acquired on or after January 1, 2013

Anything purchased before those cutoffs is noncovered. Shares that passed through complex corporate events such as mergers or spin-offs can also come out noncovered, even when the original purchase was after the cutoff, because the resulting shares may not carry a traceable basis in the broker’s system.

Getting the classification right has real money behind it. A short-term capital gain applies to any asset held for one year or less; a long-term gain applies to assets held more than one year.⁴ Short-term gains are taxed at your ordinary income rate, up to 37%. Long-term gains are taxed at 0%, 15%, or 20%. Treating a long-term gain as short-term means overpaying; treating a short-term gain as long-term means underpaying and risking penalties.

The Three Facts You Have to Supply

You need the acquisition date, the cost basis, and the sale date. The broker gives you the last one; the first two are on you.

Acquisition Date

The acquisition date is where most people get stuck, especially with shares held for decades. Start with the brokerage firm where you originally bought them. Even after a transfer, the original firm may still have purchase records. Old trade confirmations, monthly statements, and annual summaries usually list the transaction date and price. When shares have been transferred between brokers, the receiving firm sometimes includes the original acquisition date on the transfer statement, though this is not guaranteed for noncovered securities.

The holding period starts the day after you acquired the asset and ends on the day you sold it.⁴ Shares bought March 15, 2009 and sold March 16, 2010 were held one year and one day. Long-term.

Cost Basis

Your cost basis is generally what you paid for the security, plus any commissions or transaction fees on the original purchase. One hundred shares at $25 with a $10 commission comes to $2,510. Accuracy cuts both ways: overstating basis understates your gain and can trigger penalties, while understating basis means paying tax you don’t owe.

Sale Date and Proceeds

These are on the 1099-B itself. The sale date sits in Box 1c and the gross proceeds in Box 1d.² Confirm them against your own records, then compare the sale date to your acquisition date to classify the gain.

Basis Adjustments That Often Apply to Old Shares

Noncovered securities are the ones most likely to carry events that change basis beyond the purchase price. Check whether any of these apply before you settle on a number.

Inherited Shares

If you inherited the shares, your basis is generally the fair market value on the date the original owner died, not what they paid.⁵ This stepped-up basis can wipe out most of what would otherwise be a large gain. The executor may also have elected an alternate valuation date six months after death, so check the estate tax return if one was filed.

Gifted Shares

Gift basis is more complex. If you sell at a gain, your basis is the donor’s original basis (carryover basis). If you sell at a loss, your basis is the lower of the donor’s basis or the fair market value on the date of the gift.⁶ If the sale price falls between those two numbers, there is no gain or loss at all. You may also be able to add part of any gift tax paid by the donor to your basis.

Stock Splits and Spin-Offs

A split creates more shares without changing your total investment. The dollar basis stays the same; you spread it over the new share count. One hundred shares with a $1,000 total basis after a two-for-one split become 200 shares with the same $1,000 basis, so per-share basis drops from $10 to $5.⁷ Lots bought at different prices are split lot by lot, not averaged. Spin-offs work on the same logic: a portion of the parent company’s basis is allocated to the new company shares based on relative market values.

If You Cannot Find Your Records

Decades-old purchases, defunct brokerages, and missing statements can make it genuinely impossible to pin down a date or price. You still have options.

Contact the brokerage firm or its successor if it was acquired or merged. Many firms retain records further back than people expect. If the company that issued the stock still exists, its transfer agent may have records of when you first appeared as a shareholder. Historical price data can help reconstruct a reasonable purchase price if you can narrow the window.

If nothing turns up, reporting a zero basis is the safest move for penalty purposes, but you’ll pay tax on the full proceeds as gain. Some taxpayers instead reconstruct a reasonable basis from the best evidence available, such as historical prices tied to an approximate purchase period. Whichever route you take, document the method. The IRS can challenge the basis you claim, and “I don’t remember” is not a defense.

Filling Out Form 8949

Form 8949 is where you report each sale and reconcile the broker’s proceeds to the gain or loss you calculated.⁸ Part I is for short-term transactions; Part II is for long-term. Place each undetermined term sale in the correct part based on the holding period you worked out.

Pick the Right Box

For a 1099-B transaction on a noncovered security where the basis was not reported to the IRS, check Box B in Part I (short-term) or Box E in Part II (long-term).⁸ Those two boxes signal that you received a 1099-B but the broker didn’t report your basis to the IRS, which is the standard noncovered situation.

Don’t use Box C or Box F. Those are for transactions you were never issued a 1099-B for in the first place.

The Columns

Each transaction gets a single row:

Column (a): description of the property, such as “100 sh XYZ Corp”
Column (b): the acquisition date you researched
Column (c): the sale date from Box 1c of the 1099-B
Column (d): proceeds from Box 1d of the 1099-B
Column (e): your cost basis, including original commissions and fees
Column (h): gain or loss, which is column (d) minus column (e), adjusted by any amount in column (g)

Each undetermined term sale gets its own row. You can’t lump sales together except under narrow exceptions for identical securities sold the same day at the same price.

The Adjustment Code for Wrong or Missing Basis

If the 1099-B shows a basis that is wrong, blank, or zero, enter Adjustment Code B in Column (f).⁹ Code B tells the IRS the basis shown by the broker is incorrect. For sales reported under Box B or Box E, you put the correct basis directly in Column (e) and enter zero in Column (g). The IRS already knows the broker didn’t report a basis; the code just records that you’re supplying it.

Carrying the Totals to Schedule D

After Form 8949, totals flow to Schedule D (Form 1040), which consolidates all your capital gains and losses.¹⁰ Short-term totals from Form 8949, Part I move to Schedule D, Part I. Long-term totals from Part II move to Schedule D, Part II.

Losses net against gains of the same type first. Short-term losses reduce short-term gains, and long-term losses reduce long-term gains. Any remaining net loss can then offset gains of the other type. If you still have a net capital loss after all that, you can deduct up to $3,000 of it against ordinary income, or $1,500 if married filing separately.¹¹ Anything beyond that carries forward indefinitely, and keeps its short-term or long-term character when you use it in a later year.

Wash Sales on Noncovered Shares

If you sold a noncovered security at a loss and bought substantially identical shares within 30 days before or after the sale, the wash sale rule disallows the loss.¹² The disallowed loss doesn’t disappear. It’s added to the basis of the replacement shares, deferring the loss until you eventually sell those replacement shares without triggering another wash sale.

Here is the catch: for noncovered securities, the broker may not have tracked wash sales. You have to identify them yourself, adjust the basis of the replacement shares, and report the disallowed loss on Form 8949 with the appropriate adjustment code. When the replacement shares are themselves noncovered, the layered basis changes get complicated fast.

Worthless Securities

If a noncovered security became completely worthless during the year rather than being sold, the IRS treats it as sold on the last day of the tax year for zero proceeds.¹³ You still have to determine the holding period and classify the loss as short-term or long-term. Report it on Form 8949, Part I or Part II. The deemed December 31 sale date means most worthless shares produce a long-term loss, assuming they were acquired more than a year earlier.

Penalties and How Long to Keep Your Records

Underreporting a gain or overstating basis on an undetermined term sale can trigger the accuracy-related penalty, which is 20% of the underpaid tax when the IRS finds negligence or a substantial understatement.¹⁴ For individuals, a substantial understatement means your tax was understated by the greater of 10% of the correct tax or $5,000. Interest runs on top of any underpayment from the original due date until the balance is paid, and compounds daily. You can avoid the accuracy penalty by showing reasonable cause and good faith, which is exactly why documenting how you arrived at your basis and holding period matters.

For securities and other property, keep records until the statute of limitations expires for the year you disposed of the property.¹⁵ That is generally three years from the date you filed the return reporting the sale. If you underreport income by more than 25% of the gross income on your return, the IRS has six years. If you never file or file a fraudulent return, there is no time limit.

For noncovered securities you still hold, keep the acquisition records for as long as you own the shares, plus the limitations period after you sell. Losing those records while you still hold the shares is exactly how undetermined term transactions happen in the first place.

1
Internal Revenue Service. About Form 1099-B, Proceeds from Broker and Barter Exchange Transactions
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Internal Revenue Service. Instructions for Form 1099-B (2026)
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Internal Revenue Service. Notice 2009-17 – Reporting of Customers Basis in Securities Transactions
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Internal Revenue Service. Topic No. 409, Capital Gains and Losses
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Internal Revenue Service. Gifts and Inheritances
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Office of the Law Revision Counsel. 26 U.S. Code 1015 – Basis of Property Acquired by Gifts
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Internal Revenue Service. Stocks (Options, Splits, Traders)
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Internal Revenue Service. Instructions for Form 8949 – Sales and Other Dispositions of Capital Assets
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Internal Revenue Service. 2025 Instructions for Form 8949
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Internal Revenue Service. Instructions for Schedule D (Form 1040)
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Office of the Law Revision Counsel. 26 USC 1211 – Limitation on Capital Losses
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Office of the Law Revision Counsel. 26 U.S. Code 1091 – Loss From Wash Sales of Stock or Securities
13
Internal Revenue Service. Losses (Homes, Stocks, Other Property)
14
Internal Revenue Service. Accuracy-Related Penalty
15
Internal Revenue Service. Topic No. 305, Recordkeeping