An investor has held the XYZ for over 20 years. The XYZ company then spins off the ABC company. Over one year after the spin off, the investor sells his shares in the ABC company. It is my claim that the sale of the ABC stock should be reported on the 1099 as a long term transaction with unknown cost basis. However, the broker is reporting it as a short term transaction with unknown cost basis.
If is correctly shown as a long term gain on the tax return then I am thinking that this is a red flag for the IRS. Please comment.