[freeone3000]

This is also true of stocks transferred between brokerages -- it's supposed to be transfered with. If it's not, there's a correction line on the 1099 with a space for accurate cost basis info, and you'd provide the original purchase receipt as an attachment. There might be issues in the space, but cost basis on a transferred equity isn't one of them.

[NickM]

Yes, this is correct. The technical term for this is an "in-kind" transfer, and while it might occasionally allow for things to slip through the cracks, it certainly hasn't stopped capital gain reporting requirements from being both feasible and largely effective.