Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Investment cost basis justification for taxes
Old 01-06-2007, 08:35 AM   #1
Recycles dryer sheets
 
Join Date: Apr 2005
Posts: 184
Investment cost basis justification for taxes

What justifications are needed for cost basis of an investment ?

If you buy a stock or mutual fund 10 years ago - what documentation should you have for your taxes ? Original purchase confirmation letter ? What if that is not available ?

Is the cost basis stated with Vanguard or Fidelity acceptable ? I moved some stocks/funds between investment houses - I think the asset value transfers - but the cost basis did not transfer ?

Thought I read somewhere that your "audit window" is 7 years - so income/deduction documentation should be kept that long. But investment purchase confirmations should be kept as long as you hold the investment - correct ?
__________________

__________________
Delawaredave is offline   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 Early-Retirement.org 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!

Re: Investment cost basis justification for taxes
Old 01-06-2007, 09:03 AM   #2
Full time employment: Posting here.
 
Join Date: Oct 2002
Posts: 717
Re: Investment cost basis justification for taxes

You would need some kind of documentation of the date you bought the stock. A bank statement with a cancelled check would be good enough . . . something that would enable you to recreate the the cost basis. IE: you have how much you spent and the number of shares, so the price should closely match the historical price you would find on say Yahoo finance for that stock on that day (accounting for splits too). Mind you, you do not need to submit any documentation on the cost basis unless you get audited. It's pretty much an honor system unless / untill you get audited.
__________________

__________________
Random Reinforcement is Highly Addictive.
riskadverse is offline   Reply With Quote
Re: Investment cost basis justification for taxes
Old 01-06-2007, 09:52 AM   #3
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
Re: Investment cost basis justification for taxes

IRS publication 552 talks about record keeping requirement for individuals.

The IRS also talks about record keeping here: http://www.irs.gov/businesses/small/...=98513,00.html

If you get audited, it is your job to prove the cost basis of the asset.
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Re: Investment cost basis justification for taxes
Old 01-06-2007, 10:35 AM   #4
Thinks s/he gets paid by the post
 
Join Date: Apr 2006
Posts: 1,487
Re: Investment cost basis justification for taxes

Quote:
it is your job to prove the cost basis of the asset
... but if i recall correctly, absent absolute documentation a reasonable approximation is "acceptable".
__________________
d is offline   Reply With Quote
Re: Investment cost basis justification for taxes
Old 01-07-2007, 08:41 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,281
Re: Investment cost basis justification for taxes

Quote:
Originally Posted by d
... but if i recall correctly, absent absolute documentation a reasonable approximation is "acceptable".
This is an area (among many) where I think our government is really, really hosed up. Expecting the taxpayer to have the documentation to prove the cost basis after decades is just silly. It is a burden on honest people and a golden opportunity for dishonest people. There is such an easy solution:


A) Buy a capital investment, report the cost basis on that years tax return.
B) In each following year, report that cost basis again - update it if it changed due to capital improvements (or anything else that might change the cost basis).
C) When you sell it, the cost basis is right there on last years return.

No digging back decades for records, the IRS could question the cost basis or any adjustment in the year it was reported. I would sure prefer it this way. If I do some house remodeling, just report the costs that year, no digging back for records.

-ERD50
__________________
ERD50 is offline   Reply With Quote
Re: Investment cost basis justification for taxes
Old 01-07-2007, 08:49 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,619
Re: Investment cost basis justification for taxes

Uh, you'd have to go back and dig up old tax records wouldn't you?
It's just as simple to save the year-end annual statements with your tax returns. Even for decades.
__________________
LOL! is offline   Reply With Quote
Re: Investment cost basis justification for taxes
Old 01-07-2007, 09:02 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,281
Re: Investment cost basis justification for taxes

Quote:
Originally Posted by LOL!
Uh, you'd have to go back and dig up old tax records wouldn't you?
It's just as simple to save the year-end annual statements with your tax returns. Even for decades.
No - it would be on last year's return.

Not all year-end annual statements include the cost basis. I don't get one for my house, for example.

-ERD50
__________________
ERD50 is offline   Reply With Quote
Re: Investment cost basis justification for taxes
Old 01-07-2007, 09:07 PM   #8
Full time employment: Posting here.
 
Join Date: Dec 2004
Posts: 714
Re: Investment cost basis justification for taxes

ERD50, I agree it is a hassle. But, the entire system is hosed, frankly. But where would you report these cost bases on the return? Just toss a random schedule in? Never heard of this serving as evidence of basis acceptable to the feds ... I gather you're floating this as an improvement to the system.

Better to go to a national sales tax, but I'm sure that will lead to too much acrimonious debate, so let's not go there.


For those who cost average for decades, I believe a statement from Vanguard, for example, would provide reasonable third party evidence of basis.
__________________
Craig is offline   Reply With Quote
Re: Investment cost basis justification for taxes
Old 01-07-2007, 09:21 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,281
Re: Investment cost basis justification for taxes

Quote:
Originally Posted by Charles
I gather you're floating this as an improvement to the system.
Right - an improvement to the hosed system.

Quote:
Better to go to a national sales tax, but I'm sure that will lead to too much acrimonious debate, so let's not go there.
Right - that is a huge change, even if I think it has merit, I can't imagine it happening, or not getting hosed with a few years anyway.

Quote:
For those who cost average for decades, I believe a statement from Vanguard, for example, would provide reasonable third party evidence of basis.
Again, that is fine for mutual funds that provide that info, but many capital investments do not.

-ERD50

__________________

__________________
ERD50 is offline   Reply With Quote
Reply


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


Similar Threads
Thread Thread Starter Forum Replies Last Post
Re-Thinking investment strategy Bimmerbill Young Dreamers 10 06-07-2006 12:43 PM
401k Investment Option strap hanger FIRE and Money 0 09-21-2005 11:05 AM
Low cost funds into ETFs? Olav23 FIRE and Money 26 07-06-2005 10:42 PM
The Hidden Cost of War Mountain_Mike Other topics 4 06-20-2005 08:16 PM
New cost of having a web presence cute fuzzy bunny Other topics 22 05-30-2004 06:43 PM

 

 
All times are GMT -6. The time now is 02:10 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.