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Subject:  Re: My first ever "Notice" Date:  7/4/2012  8:36 PM
Author:  ptheland Number:  116393 of 123001

QUESTION 1 - Is this $4776 my adjusted cost basis ... or should I have reported the $4993 which I actually paid as my cost basis?

Probably neither is correct. Your basis is what you originally paid, plus all of the taxable income you reported for the years you owned it, less all the flow through deductions you reported, less any distributions, plus or minus a few other things I've deliberately omitted for now.

Their notice to me states that the sale of CODI for $5522, which was reported to them by my broker, was NOT included on my return -- and they recomputed my taxes using a zero cost basis. They apparently missed the Form 4797, and the carryover gain to Schedule D, Line 11.

That's because it really should have been reported on schedule D to begin with, not on form 4797. (Well, not all of the sale, anyway. Perhaps some should have been reported on Form 4797, but you'd need to look at the materials accompanying your K-1 to determine if any of the sale should be reported on Form 4797.)

QUESTION 2 - Do I owe the IRS more, less, or exactly what I paid --