Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Old 01-07-2013, 09:40 AM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: May 2004
Posts: 10,894
Originally Posted by pb4uski View Post
One thing to be sure of is that your basis and Vanguard's basis are the same before proceeding. Because I use average cost across covered and uncovered shares, for a few tickers my basis differs from Vanguard's so I'll have parallel records in Quicken that differ from Vanguard until all my uncovered shares have been sold. After that, once all the shares are covered shares they should align.
But you've only sold uncovered shares, and you've used the "average cost" basis for them, right? Say you changed to Spec ID right now as far as Vanguard was concerned. I think Vanguard won't be reporting any cost basis to the IRS for sales of your uncovered sales, they'll send you a 1099-B at tax time with the cost basis of these uncovered shares that assumes they were sold using the average cost basis. That's what I'll report to the IRS, since that's the cost basis I've historically used for these uncovered shares. But, as I understand it, if you also want to sell some (recently purchased, higher cost basis) >covered< shares today using the Spec ID method to tax loss harvest, you can do that, too, and the 109-B VGD sends to the IRS (and you) on these shares will be accurate reflections of the prices you paid for those exact shares.
As a backup I'll record a "snapshot" of the average cost basis of my uncovered shares in all my taxable funds as of today. That'll be the share price I'll continue to use going forward when I specifically identify these uncovered shares for sale in the future.
This use of different cost basis methods (separate for covered and uncovered shares) appears to be countenanced by IRS rules.

As usual, everyone should do their own research and consult a professional. I'm a random guy on the interwebs with no particular expertise in this stuff.

"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-07-2013, 09:50 AM   #22
MichaelB's Avatar
Join Date: Jan 2008
Location: On the road again
Posts: 21,128
Here's a Q&A from the IRS that might be of interest Cost Basis Reporting Overview and FAQs One example

52. How is an averaged basis determined for mutual fund or DRP stock when some of the shares are covered securities and some are noncovered?
Beginning in 2012, the regulations treat mutual fund and DRP stock that is a noncovered security as being held in a separate account from stock that is a covered security. Because stock is averaged on an account-by-account basis starting in 2012, the basis of shares that are covered securities will be the average basis of only the covered securities and the basis of the shares that are noncovered securities will be the average basis of only the noncovered securities. However, if a broker has accurate basis information for shares that are noncovered securities and makes a “single-account election” for some or all of the shares, the shares subject to the single-account election are treated as covered securities and their basis is averaged with the shares that are covered securities.

MichaelB is online now   Reply With Quote
Old 01-07-2013, 10:46 AM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 13,195
Originally Posted by samclem View Post
But you've only sold uncovered shares, and you've used the "average cost" basis for them, right? ...
Not exactly. I use average cost across all shares (non-covered and covered shares combined - the typical application of average cost before this covered/non-covered crap started).

Vanguard uses average cost separately for non-covered shares and for covered shares. For sales, it reduces non-covered shares at average cost first and once all non-covered shares have been sold it reduces covered shares (consistent with the two separate accounts in the previous post).

For any tickers where I have sold a portion of non-covered shares my remaining basis will be different from what Vanguard shows for the non-covered shares due to the difference in approaches.

Luckily I have only a few tickers where my cost basis differs from Vanguard's and now that the 0% capital gains rate is permanent I plan to do some gains harvesting and eventually our records will align.
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
pb4uski is offline   Reply With Quote
Old 01-07-2013, 11:13 AM   #24
Thinks s/he gets paid by the post
grasshopper's Avatar
Join Date: Oct 2010
Posts: 1,545
I found a big price difference in older shares of my 2 year bucket VFSUX, so I switched to Spec-ID. Everything else is covered now that I took a bunch of LTCG in 2012. I reconciled cost between Quicken and Vanguard .01 difference. Going on 4 years without touching my 2 year bucket.
For me experiences are not good or bad, just different
grasshopper is offline   Reply With Quote
Old 01-08-2013, 08:28 PM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: May 2004
Posts: 10,894
For those considering more frequent selling and buying for the reasons we've discussed, another factor to consider: fund-imposed restrictions on buying after selling. For most Vanguard funds the wait is 60 days. A two-month delay on getting back into a fund will get the clock started later for purposes of establishing LTCG status.

There may be workarounds for this--Vanguard waives the 60 day restriction for some types of purchases, including:
- "Transfers and re-registrations of shares within the same fund."
- "Conversions of shares from one share class to another in the same fund."
- "Purchases of ETFs"

Of course, if we held the funds as ETFs in the first place there would be no trading restriction issue. Something to think about . . .

"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


All times are GMT -6. The time now is 10:34 AM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.