QYLD Multi-Lot ROC Before Sale: 1099-DIV Box 3 Basis Erosion
PROOF LOG #027
QYLD Multi-Lot ROC Before Sale: 1099‑DIV Box 3 Basis Erosion
High yield can hide which lot lost basis first.
High distributions can look simple while Box 3 adjustments reduce basis by lot.
FDL verifies prepared lot-level Box 3 basis reductions through Audit Trail and Tax Alpha Dashboard.
The client sees yield.
The CPA needs the lot-level basis path.
In this QYLD case, the CPA prepared lot-level 1099-DIV Box 3 basis reduction adjustments before any sale occurred.
FDL did not auto-allocate aggregate ROC. It verified the prepared lot-level path.
Same ticker ≠ same basis path.
Proof Summary
Problem: Two QYLD lots can carry different prepared Box 3 ROC basis reductions before sale.
Prepared input: The CPA prepared lot-level ADJUST rows with negative basis-reduction amounts and Target Lot ID mapping.
Board result: Audit Trail shows different lot-level basis erosion, Tax Report stays quiet, and Tax Alpha Dashboard shows ROC (§301) Embedded $218,300.
Boundary: FDL does not auto-allocate ROC, estimate yield, or replace CPA judgment. It verifies prepared, in-scope records through deterministic outputs.
WATCH THE RECONSTRUCTION
Watch prepared Box 3 adjustments become a reviewable multi-lot basis path before sale.
- High yield can hide which lot lost basis first
- Lot 1 absorbed $193,900 of prepared ROC basis reduction
- Lot 1 adjusted unit basis moved to $19.62
- Lot 2 absorbed $24,400 of prepared ROC basis reduction
- Lot 2 adjusted unit basis moved to $16.61
- Tax Report remains quiet because no sale occurred
- Tax Alpha Dashboard shows ROC (§301) Embedded $218,300
- $193,900 + $24,400 = $218,300 total prepared ROC basis reduction
EXECUTIVE PROOF
Review Blind Spot
- same ticker can hide different basis paths
- 1099-DIV Box 3 can reduce basis before sale
- no Tax Report row exists yet
- the reviewer still needs the lot-level path
FDL Registry of Truth™
- Audit Trail shows both QYLD lots remain OPEN
- Lot 1 ROC basis reduction: $193,900
- Lot 2 ROC basis reduction: $24,400
- Tax Alpha Dashboard shows ROC (§301) Embedded $218,300
CASE MOTION
PREPARED BOX 3 ADJUSTMENTS
ADJUST rows were used.
Negative amounts reduced basis.
Target Lot IDs were manually injected.
FDL did not auto-allocate ROC.
AUDIT TRAIL
Audit Trail is the primary proof surface.
Lot 1 ROC basis reduction: $193,900.
Lot 2 ROC basis reduction: $24,400.
Both QYLD lots remain OPEN.
QUIET TAX REPORT
No sale occurred.
No realized row appears.
The Tax Report stays quiet by design.
Basis changed before sale.
DASHBOARD VISIBILITY
Tax Alpha Dashboard shows ROC (§301) Embedded $218,300.
This is a visibility surface.
It is not tax savings, Specific ID Alpha, FIFO alpha, or ROC alpha.
The lot-level basis path is reviewable before sale.
FORENSIC EVIDENCE
ROC proof lock
- Lot 1 ROC basis reduction$193,900.
- Lot 2 ROC basis reduction$24,400.
- Total prepared ROC basis reduction$193,900 + $24,400 = $218,300.
- Dashboard tie-outTax Alpha Dashboard shows ROC (§301) Embedded $218,300.
Adjusted basis proof lock
- Lot 1 adjusted basis$981,100.
- Lot 1 adjusted unit basis$19.62.
- Lot 2 adjusted basis$830,600.
- Lot 2 adjusted unit basis$16.61.
- Total adjusted basis$981,100 + $830,600 = $1,811,700.
- Original basis less ROC reduction$2,030,000 - $218,300 = $1,811,700.
This is the point of the white-box architecture:
same ticker, different lots, different basis paths, and no-sale status stay separate and reviewable.
WHY THIS CASE MATTERS
UHNW clients may see high yield as income-like cash flow.
CPA teams need to know which lots have already lost basis.
The commercial value is not tax savings.
The value is reviewable control over the lot-level basis path before sale.
WHAT FDL IS SHOWING HERE
FDL verifies prepared lot-level 1099-DIV Box 3 basis reductions.
It keeps lot-level basis erosion visible in Audit Trail.
It keeps Tax Report quiet until a real sale or basis-excess event exists.
The client sees yield. The CPA needs the lot-level basis path.
CHOOSE YOUR NEXT STEP
FDL — deterministic tax infrastructure for prepared, in-scope records.