TIAA-CREF sucks!

[Texas Proud]

But this seems to be an opportunity to try to defraud the IRS as neither vanguard or TC have reported any gains to the IRS. Of course its up to the tax payer to make sure its all computed correctly, but an unscrupulous person might try to declare zero gains.

my bold....

None.... I am going back to your prior post.... read it again... it appears that you are saying that vanguard or TC would have sent the GAIN information to the IRS... but in your post later you say you understand my post... they contradict each other..

If you understand... then great... but then don't post something like the above and then say you understand... No gain information is EVER sent to the IRS... even if TC HAD sent the information to Vanguard and Vanguard HAD sent it to you... the IRS would NOT have this information and YOU could STILL claim zero gain....


I do have a question... does the form say you have a zero gain or a zero cost basis?? I can not believe they put down the sales price as the cost basis showing a zero gain, but I could be wrong...

 

[clifp]

After calculating the cost basis of a fund that I reinvested into over 5 years, which also changed names halfway through, on the heels of calculating the cost basis of three spin offs created to "unlock shareholder value" from a form with at least 50 calculations and if/then statements...I decided from then on that my stock and mutual fund purchases would have one buy and one sell. All in and all out.

I kinda figured that doing this and doing it all with one company and their captive funds would make tax time a point and click 15 minute event, but thats not to be. I had to spend a whole three hours on it. (martha just called me a name!)

Three hours is nothing. I defy anybody to figure out the cost basis of AT&T shares for say the last 40 years with dividends reinvested. After a couple of hours I managed to figure out the cost basis of Quest one of the several dozen spin off from AT&T and the baby bells over the last few decades, and sold it. As for the rest, my mom's tax guy and I concur that that the rest of the baby bells can't be sold until her death.

The good news is that I first remember looking at the stock 30 years ago in High School and the value of the stock was about $3,000, now it and the spins-off (although most of the new ATT (old SBC) has combined much of the original AT&T) is worth close to $45K and generates $1500/year in dividends.

I concur with CFB, even in the accumulation phase I'd be very cautious about reinvesting dividends and capital gains in taxable accounts. The tax complications and believe it or not the cost and hassle associated with DRIPs can outweigh the benefits. In a retirement account,reinvesting makes much more sense, although even in a retirement account making a conscious decision that once a year, yes I really want to invest additional money in the fund is good discipline.

 

[nun]

my bold....

None.... I am going back to your prior post.... read it again... it appears that you are saying that vanguard or TC would have sent the GAIN information to the IRS... but in your post later you say you understand my post... they contradict each other..

If you understand... then great... but then don't post something like the above and then say you understand... No gain information is EVER sent to the IRS... even if TC HAD sent the information to Vanguard and Vanguard HAD sent it to you... the IRS would NOT have this information and YOU could STILL claim zero gain....


I do have a question... does the form say you have a zero gain or a zero cost basis?? I can not believe they put down the sales price as the cost basis showing a zero gain, but I could be wrong...

Texas Proud
Yes I think my confusion is an opportunity for learning. Maybe I'm not alone in not fully grasping the reporting requirements of mutual fund companies to the IRS as up to this date I've received 1099-Bs with proceeds from sales on them along with a statement that shows number of shares sold, price. proceeds, cost basis and capital gains. Until my OP I was not aware that the gains were not reported by the mutal fund company to the IRS. I assumed that the IRS checked the gains I enter on my Schedule D with numbers it got from the companies. It was only when I saw that my Vanguard annual tax statement showed the proceeds from my TC funds sale, no cost basis info and had the profit (loss) box as zero that I began to worry.

I think this is a good lesson that we can always learn and must always be vigilant. maybe some folks are a like me, a bit complacent and its only when the gaps in the mutual fund company service become apparant that we get a deeper understanding of the regulations.

 

[Nords]

I concur with CFB, even in the accumulation phase I'd be very cautious about reinvesting dividends and capital gains in taxable accounts. The tax complications and believe it or not the cost and hassle associated with DRIPs can outweigh the benefits.

I don't get it. Even an Excel spreadsheet can handle a cost-basis chore. Entering the data and tracking it is also a chore, sure, but I'd hate to pass up the discipline of reinvesting & compounding because I'd have to track data over a few decades.

Quicken makes it even easier. Selling shares allows one to select specific shares using the "minimum capital gains" button, which can be used to generate a list that more or less matches the Schedule D format.

 

[cute fuzzy bunny]

Well, you're assuming theres no reinvestment or compounding. There is! Once or twice a year I take the built up cash generated and look for stuff thats cheap to buy or represents a decent value.

This year we bought some 6.25% cd's and some of brewers SLM to offset the run up in the equities portion of the portfolio.

I know quicken "makes it easier", but I spent a couple of hundred hours over the year shoving stuff into it and correcting mistakes. Then the ameritrade -> quicken -> turbotax pipeline filled out my schedule D with a bunch of ticker symbols and left out the # of fund shares, so I got to go back and change ALL of that back in quicken, remove it all from turbotax, and try again.



I figure i'm paying taxes on the distributions anyhow...take those and do our spending from them to optimize our withdrawal/tax situation, then find places to fill out, balance, and bargain shop other portfolio holdings.

And my biggest annoyance is that when I sell I have to go back a couple of years in the paper annual transaction reports to find the one buy.

The really good news is that I think i'm darn close to my optimal end state portfolio and may not sell anything for a while. Take the dividends and let it ride.

 

[samclem]

I figure i'm paying taxes on the distributions anyhow...take those and do our spending from them to optimize our withdrawal/tax situation, then find places to fill out, balance, and bargain shop other portfolio holdings.

I do the same thing. All the distributions from taxable MFs are deposited into a MMF. That's where we get money for spending and to invest in asset sectors that are below our target allocation window (in addition to selling fund shares of sectors that have become overweighted).

 

[nun]

I don't get it. Even an Excel spreadsheet can handle a cost-basis chore. Entering the data and tracking it is also a chore, sure, but I'd hate to pass up the discipline of reinvesting & compounding because I'd have to track data over a few decades.

Quicken makes it even easier. Selling shares allows one to select specific shares using the "minimum capital gains" button, which can be used to generate a list that more or less matches the Schedule D format.

After cutting and pasting most of my historical data from the TC website into excel and tediously typing in the rest from my records it took me a couple of hours to come up with the LT and ST cost basis and gains. The worst thing was going through the transactions and finding the few redemptions I made over the years and making sure they were subtracted from the running totals. In the end the total number of shares I got in the spreadsheets agreed with those on my statement so I'm pretty sure the calculations are correct.

I used to track with Quicken, but decided not to fork over an extra fee to keep the online access a couple of years ago. I figured that the fund companies tracking combined with paper records would be ok, guess I was wrong.

 

[ferco]

This is all very confusing ! If I bought 100 shares of XYZ mutual fund or stock in 1999 @ $32/share and bought 10 shares per year at different prices('00-'05) and decided to sell 75 shares in '06, I would need to calculate the cost basis for EACH of the years purchases to report to the IRS.....? You've got to be kidding....There has to be an easier way.

 

[cute fuzzy bunny]

If you were using FIFO, you'd report the sale as part of the original batch of 100 you bought and your cost basis would be $32, bought in 1999, for a long term gain.

Its selling the next 75 that would be a lot of fun. You'd have to report each individual purchase as

the residual 25 from 1999
the 10 from 2000
the 10 from 2001
the 10 from 2002
the 10 from 2003
and the 10 from 2004

Purchase dates and prices for each, same sale date and sale price. All long term gains.

 

[LOL!]

After cutting and pasting ...and tediously typing in the rest from my records it took me a couple of hours to come up with the LT and ST cost basis and gains. .... In the end the total number of shares I got in the spreadsheets agreed with those on my statement so I'm pretty sure the calculations are correct.

See? It was like sudoku and it sharpened your mind. And you now enjoy the sense of self-satisfaction that only comes from cleverly doing a difficult puzzle.

Now you need a disk crash, so all your work is lost. That will allow you to do it all over again and double your satisfaction.

 

[samclem]

This is all very confusing ! If I bought 100 shares of XYZ mutual fund or stock in 1999 @ $32/share and bought 10 shares per year at different prices('00-'05) and decided to sell 75 shares in '06, I would need to calculate the cost basis for EACH of the years purchases to report to the IRS.....? You've got to be kidding....There has to be an easier way.

ferco,
There is an easier way, but it isn't available to everyone. IF your MF company provides an average cost basis for your shares that covers the entire time you've been investing with them, then you can simply use that figure when you sell shares. This is the simplest way to do things. But:
-- Your MF company must have the purchase data for the entire time you've been purchasing funds in that account, and must use all the years of data in computing your average cost. I think most MF companies only started to do this within about the last 10 years.
-- Using the "average cost" method will not allow you to minimize your taxes through use of more sophisticated techniques. For example, if you use the "specific shares" method (identifying exactly which shares you sold, by the purchase date), you can do "tax loss harvesting" if the share price has declined when you sell. Example: You've been buying a few shares every month over a period of 5 years, and the share price has been rising over the whole time, until just this month, when share prices dropped. The average price you paid for the shares over the whole period was $8.00, the price at the beginning of last month was $12.00, but now the shares are worth just $6.00. Say that today you sold 100 shares and received $600. If you use the "average cost" method, your loss (for tax purposes) would be $200 (you bought the 100 shares for an average price of $8 and sold them for $6). But, if you use the "specific shares" method, you could identify the shares you bought at the highest prices (in this example, probably the ones you bought just before the price drop) and show a bigger loss for tax purposes. Two caveats:
--- Once you use this method, you can never go back to using the simpler "average cost" method. You're now stuck with the need to identify which specific shares you are selling as long as you have that account.
--- When you do this tax loss harvesting, all you are doing is deferring taxes (you have to sell those shares you bought cheaply someday, after all). Most people hope they'll be in a lower tax bracket or have offsetting deductions when the cheap shares must eventualy be sold ( or they plan to gift/will the shares to others).

There are vaiations on this theme: You can use FIFO (First In- First Out), which means you sell the shares in the order you bought them. You can also use average costs by short-term and long-term holding periods.

As for me -- I use the average cost computed by Vanguard. I miss out on the ability to save a few bucks with more sophisticated strategies, but it is much simpler.

 

[nun]

Just a quick question, isn't using the average cost of a share and the number of shares you sold to calculate the cost basis the same as just adding up all the purchases and reinvested annual gains and subtracting all the sales to get the cost basis. Then knowing how much you got when you sold them you can easily find the gain.

Using FIFO wouldn't you then just calculate a LT cost basis for all the shares you've held for over a year and a short term cost basis for the shares you've held less than a year.