Average cost basis tax question

[donheff]

I use average cost for calculating Capital Gains. Vanguard's cost summary tells me the average cost of shares I sell and the date sold but doesn't provide a date used to calculate the cost basis. As I understand the law, they are supposed to sell off the earliest shares and use that date to determine whether the gains are long or short term. The obviously make the determination since they report everything as long term but they don't show a purchase date. I searched around on the VG site but can't find any details about purchase history. If I dig deep enough in my paper records I could probably figure out when I first bought the VG funds but what a PITA. All my gains are identified as long term but since I can't figure out the appropriate date of purchase I just plugged in 1/1/2007. What do others use? Does it matter?

[donheff]

Well, I did find the original setup dates for the funds using a search function. If I simply use the date the funds were setup I should be OK I think.

[justplainbll]

If you're using average cost basis and it's classified as long term the date acquired is specified as 'various', unless the reporting standards have changed since 2010.

[donheff]

Quote:

Originally Posted by justplainbll If you're using average cost basis and it's classified as long term the date acquired is specified as 'various', unless the reporting standards have changed since 2010.

Can you just type "various" into the date block on Turbo Tax and in the Schedule D?

[justplainbll]

Quote:

Originally Posted by donheff Can you just type "various" into the date block on Turbo Tax and in the Schedule D?

Yes

[MichaelB]

Quote:

Originally Posted by donheff Can you just type "various" into the date block on Turbo Tax and in the Schedule D?

Yes. TT will only ask to specify if it is long or short term, and it is acceptable to the IRS.

[donheff]

Thanks. I have it in there correctly now.

Switching from an accountant to TT is a PITA. I have all the old tax forms but on a number of things it is still hard to figure out what to enter in TT to get a particular result in the 1040. Partnership (K1) issues are the worst, although I think I have them figured out. DW is effectively retired but will continue to get about $30K in partnership income for 15 years. So we have to deal with self employment payroll tax, passive/active income, etc.

[justplainbll]

Quote:

Originally Posted by donheff Thanks. I have it in there correctly now. Switching from an accountant to TT is a PITA. I have all the old tax forms but on a number of things it is still hard to figure out what to enter in TT to get a particular result in the 1040. Partnership (K1) issues are the worst, although I think I have them figured out. DW is effectively retired but will continue to get about $30K in partnership income for 15 years. So we have to deal with self employment payroll tax, passive/active income, etc.

Sounds like partnership income MIGHT be considered passive income and not subject to payroll tax

[MichaelB]

Quote:

Originally Posted by donheff Thanks. I have it in there correctly now. Switching from an accountant to TT is a PITA. I have all the old tax forms but on a number of things it is still hard to figure out what to enter in TT to get a particular result in the 1040. Partnership (K1) issues are the worst, although I think I have them figured out. DW is effectively retired but will continue to get about $30K in partnership income for 15 years. So we have to deal with self employment payroll tax, passive/active income, etc.

The switch should only be a PITA in the first year. If you stick with TT it should be much easier next year and on.

[donheff]

Quote:

Originally Posted by justplainbll Sounds like partnership income MIGHT be considered passive income and not subject to payroll tax

Nah, we checked with the firm and it is active. She is technically employed (grandfathered under an old "special partner" program preceding formal retirement) but doesn't actually have to do anything - although she will probably be involved in a few business development activities. Kind of like a retainer.

Quote:

Originally Posted by MichaelB The switch should only be a PITA in the first year. If you stick with TT it should be much easier next year and on.

I can already see that. Last year, I dry ran TT while the accountant did the actual filing. I had to make some adjustments after the fact to get things to match (or very close) which was an education itself. A couple of more learning experiences this year and I think it will be easy sailing. Still waiting for the 2011 K1 and the state tax report from the firm -- part of DW's $30K is taxed in multiple states handled by the firm but I need to get that into TT properly to reduce our DC tax. I am just doing place holders now using last year's data to see if we are OK on withholding. So far so good.

[GrayHare]

Brokerage sites, even the ones that have been online "forever" often do not have records online more than about 10 years old. For a buy-and-hold investor, that means digging out the paper records. If you reinvested dividends for decades, calculating the exact cost basis can be a very tedious process. Wish the sites did that calc for us. As the saying goes, "That's why they make computers."

[Midpack]

Quote:

Originally Posted by GrayHare Brokerage sites, even the ones that have been online "forever" often do not have records online more than about 10 years old. For a buy-and-hold investor, that means digging out the paper records. If you reinvested dividends for decades, calculating the exact cost basis can be a very tedious process. Wish the sites did that calc for us. As the saying goes, "That's why they make computers."

That's a fact, I have tedious spreadsheets to track all transactions too. I wish Vanguard kept track.

While I was working I used an payroll deduction to Vanguard which was invested (DCA) monthly. The tracking was so tiresome, I stopped the auto invest instruction, and just invested every 6 months ± myself to reduce the number of transactions.