How do I report undetermined term transactions for noncovered tax lots on my tax return?

What happens if I literally can't find the original cost basis information? Some of these were from an account my grandfather set up years ago that I took over. Would it be okay to use the value from when I took over the account? Or am I stuck with a zero cost basis?

If you can't locate the original cost basis documents, you have several options. First, try contacting your previous broker - they might have records even though they weren't required to report them to the IRS. Your grandfather's financial advisor or accountant might also have this information. If those avenues fail, you can make a good faith estimate based on available information. For inherited assets, you generally receive a "stepped-up" basis to the fair market value on the date of death. If you took over while your grandfather was living, you would typically use his original basis (not the value when you took over). As a last resort, some tax software allows you to use a reasonable estimation method, but document your methodology carefully in case of audit.

How does it determine the holding period if your broker couldn't? Does it somehow have access to more information or does it just make an educated guess?

Is it actually accurate? I've tried other tax tools before that claimed to handle complex situations but ended up giving me wrong information. Especially concerned since we're talking about noncovered tax lots where there's no official reporting to compare against.

It uses historic price data and transaction patterns to help identify likely purchase dates, then calculates the most probable holding period based on when you sold. It's not magical - it can't create information that doesn't exist - but it does a really good job connecting dots that might not be obvious. For your second question, I found it to be very accurate. The tool actually flagged several transactions my previous software had gotten wrong. The big difference is it's specifically designed for investment tax issues rather than being a general tax preparer. If it can't determine something with confidence, it tells you and suggests documentation to gather rather than guessing.

Wait, how does that actually work? I thought it was literally impossible to get through to the IRS by phone. Last time I tried I was on hold for 2 hours and then the call dropped.

This sounds like a paid advertisement. I highly doubt the IRS is giving advice on specific tax situations over the phone. They usually just direct you to publications or tell you to consult a tax professional.

The service basically keeps dialing and waiting on hold so you don't have to. They use some tech that knows the best times to call and which menu options to select. When an agent finally picks up, you get a call and are connected immediately. It's simple but effective. I totally get your skepticism. I was surprised too, but the IRS agent I spoke with was actually really helpful. They didn't give specific investment advice, but they did clarify the reporting requirements for undetermined term transactions and explained the documentation I should keep. They pointed me to specific sections of Publication 550 that addressed my situation. Obviously individual experiences may vary, but it was definitely not a waste of time for me.

I did find some old trade confirmations in my email, but there are still about 8 positions I can't track down. Would it be risky to just make my best guess based on when I think I bought them? I'm pretty sure they were all purchased in 2019, which would make them long-term anyway.

Making a reasonable estimate is acceptable when you truly don't have the records, but you should document how you arrived at your estimate. I'd recommend noting the method you used (like "estimated based on account statements showing position existed as of X date") in your tax file. The IRS generally allows good faith estimates when original records aren't available. Since you believe they're from 2019, they would indeed be long-term holdings. Just be consistent in your approach, and if you later find the actual information, you can file an amended return if there's a significant difference.

It absolutely affects your tax rate! Short-term gains (held less than 1 year) are taxed at your ordinary income rate, which could be up to 37% depending on your bracket. Long-term gains (held more than 1 year) are taxed at either 0%, 15%, or 20% depending on your income level. That's a massive difference! This is why determining the correct term is so important.