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Old 10-01-2007, 07:53 AM   #21
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I do number #2 as well. Haven't had a problem yet - of course, I am a buy and hold type person, and don't sell much on a year to year basis. Hopefully Schwab will have good records when I do!
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Old 10-01-2007, 12:55 PM   #22
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Originally Posted by kaudrey View Post
Hopefully Schwab will have good records when I do!
Just in case they don't, at each year's end, I like to go to the
Accounts->History tab and print out all my transactions for the year.
You can print to a PDF file and/or put a hard copy in your records.
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Old 10-02-2007, 09:18 AM   #23
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OK, so I realized I needed to take some time to learn about how sales of mutual funds are taxed. I went to this site (Selling Mutual Fund Shares) to try and educate myself. There I learned that there are two ways of reporting gains/losses for mutual funds when you sell. You can use the same rules as those used for stocks, or the averaging method.

Basically, it sounds like stock method lets you have greater flexibility in that you can choose which shares you want to sell and therefore report smaller gains on what you sell. However, this method can be very detailed if you DCA into your mutual funds and/or have dividends reinvested. So, if you think this through ahead of time, and decide this is how you want to do your taxes, then it would be best to buy in lump sums and have dividends sent to your MM acount.

The averaging method is a little easier in that you don't have to figure out what shares you sold when you sell. So, if you have tons of transactions (ie. reinvested dividends), you'll likely find this method easier to do. Drawbacks are that once you start this for a mutual fund, you must always use this method. It also does not let you choose which shares you want to sell, so you may not have quite as favorable tax treatment. So it seems that for the slightly easier method, you may be giving up a little bit of advantage in how you are treated at tax time. However, I did read this: "For many people this method is not only the simplest method, but also the method that produces the best tax result." (Single-Category Averaging Method)

Hmmm...is the "stock" method really all that much more advantageous (in terms of tax treatment) than the averaging method Opinions??
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Old 10-02-2007, 09:23 AM   #24
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Unless you have a very complicated life (simple girl :confused: ), I also encourage you to be a tax do-it-yourselfer. The tax software is real good at taking care of the basic ins and outs of income tax. If you have a complicated tax life, please ask yourself "why?"
LOL, our tax lives have indeed become more complicated over the last year. Due to moving around for my husbands' job, we have lived in multiple states. Plus, we had a rental for the first time. Last year was the first year we used an accountant, primarily for these reasons. Prior to this, I was a steadfast TurboTax user. I do plan to return to doing our taxes myself when our lives become "simpler" again!
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Old 10-04-2007, 09:48 PM   #25
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Quote:
Hmmm...is the "stock" method really all that much more advantageous (in terms of tax treatment) than the averaging method Opinions??

Hey Simple Girl,

I gotta say that I am impressed with your research on this subject as well as your summation of each method. You seemed to have nailed it. Hard to say which is better one to use, but at least there is a choice. I use specific shares. You do not always have a choice when it comes to taxes.

Another point, once you start doing your taxes one way ( specific or average) with an individual MF, you must continue to do it that way as long as you own that fund (can not switch).
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