cost basis after long term reinvest

[GrayHare]

Is there an online source of historical mutual fund reinvestment rates/amounts? After an initial purchase of shares, I've held some funds for decades, set to reinvest all divs and gains, with no subsequent sales or other purchases. I'd like to know my current cost basis in the asset without having to dig through hundreds of old monthly paper statements, some of which may be lost, to find and manually add the reinvestments. Is there an easier way than the musty, old paper statements from the '80s?

 

[pb4uski]

You can likely get this information from your fund company. They should be able to provide you with purchase and reinvested dividend information via a transaction report on your account.

I had to do something like this for my Dad's account many years ago. Wasn't easy. Some of the old ones were micro fiche printouts.

 

[GrayHare]

You can likely get this information from your fund company. They should be able to provide you with purchase and reinvested dividend information via a transaction report on your account.

Unfortunately some of the MFs were held at a brokerage that no longer exists. I've assumed, perhaps incorrectly, the current brokerage would not be able to address those. Or are you saying go directly to the fund company rather than a broker?

I've learned Schwab offers a MF "Cost Basis Calculator" to its clients, but don't have an account there to know if one can simply type in a ticker and time period and have the calculator spit out the cost basis. Maybe Schwab's calculator only works on MFs during the period they were in one's Schwab account? I don't see that other brokerages have a similar calculator.

 

[kaneohe]

Do you save old tax returns? The DIVs/CGs should be documented there.

 

[pb4uski]

Another approach would be to take your initial cost and then add to it the dividend income from that fund that you reported on all your tax returns (if you have Schedule B's going back that far) since if reinvested that would add to your cost basis. Depending on the amount of the gain, at 15% you may get the the point of diminishing returns.

When I had to do it I did some reasonable estimations where then data was hard to get and figured that I would just defend what I did if it was audited even though I knew the likelihood of audit was remote. They have bigger fish to fry.

 

[GrayHare]

Do you save old tax returns? The DIVs/CGs should be documented there.

Good idea, that can fill in a few gaps, plus sums 12 months of data into one number for a year, but some of the older returns have been shredded. I see online some people say when this happens they just report a guesstimated cost basis.

 

[Sunset]

Wow.... so besides the MER rates , now I have another reason to prefer etf's to MF's.

This is too complex.
Initially I thought with a single purchase, the mutual fund should be able to tell you the capital gains and dividend declared for every year.
But as soon as I realized the number of shares increases per year, it becomes harder to figure the basis...

 

[LOL!]

Even if your old broker does not exist, a record of your transactions may have been passed on to your current broker. At least that was the case for us. It sure wouldn't hurt to ask them because after all you are paying them fees anyways.

@Sunset, ETFs would have the same exact issue that open-ended mutual funds would. ETFs do pay dividends and sometimes cap gains distribution both of which can be [automatically] reinvested in more shares if the investor so chooses. The same goes for stocks. We see people asking similar questions about decades old DRIPs.

And then there are those who were given stock by grandparents who in turn were given the shares by their parents. It's all a headache to determine the cost basis, but the IRS will gladly accept zero for the cost basis. An easy out is to just give away all the shares to charity.

 

[ERD50]

.... Depending on the amount of the gain, at 15% you may get the the point of diminishing returns.

When I had to do it I did some reasonable estimations where then data was hard to get and figured that I would just defend what I did if it was audited even though I knew the likelihood of audit was remote. They have bigger fish to fry.

Yes, I'd first take a step back, and get an overview of what I do know. Then determine just how much difference is at stake.

Some reasonable assumptions might get you close enough. You probably won't get audited, and if you do, explain it and I think you'll be OK. Even on the off chance you end up owing, it will likely be small, and no fines if no intent to hide anything. I'm sure you are not the first.

BTW, I'll rant a bit here at how awkward our tax system is. It just isn't reasonable to expect people to determine a cost basis going back so far. If they really want to use this system, they ought to make you report the cost basis of all assets, every year (whether you sold any or not). That way, no one would need to go back further than last years tax form for this info.

But since it is what it is - I never reinvest dividends in a taxable account. Let them accumulate, and then either spend, or make one purchase you can track.

-ERD50

 

[pb4uski]

In fairness, the OP's problem will decay over time as fiduciaries are now required to track basis so for more recent accounts/transactions it is not an issue so you can consider the basis for your rant "fixed".

 

[GrayHare]

Fiduciary tracking takes away this problem going forward. It's past div and CG reinvestment that's the prime cause of the difficulty. An original purchase might have happened long ago but at least it's only one number to dig out. Quarterly, or the dreaded monthly reinvestments, multiplies the figuring. I don't know when MFs began offering automatic reinvestment, 1960s maybe?

 

[Sunset]

Yes, I'd first take a step back, and get an overview of what I do know. Then determine just how much difference is at stake.

Some reasonable assumptions might get you close enough. You probably won't get audited, and if you do, explain it and I think you'll be OK. Even on the off chance you end up owing, it will likely be small, and no fines if no intent to hide anything. I'm sure you are not the first.

BTW, I'll rant a bit here at how awkward our tax system is. It just isn't reasonable to expect people to determine a cost basis going back so far. If they really want to use this system, they ought to make you report the cost basis of all assets, every year (whether you sold any or not). That way, no one would need to go back further than last years tax form for this info.

But since it is what it is - I never reinvest dividends in a taxable account. Let them accumulate, and then either spend, or make one purchase you can track.

-ERD50

Good point about getting close, if OP does get audited, which is simply the gov't asking "how he got those numbers" , he can show them. To disagree, they will need to crunch the numbers themselves to find the difference if any, so in the end OP would get the right number or good enough anyhow.

+ 1 on the Rant.....

 

[youbet]

they ought to make you report the cost basis of all assets, every year (whether you sold any or not).

You're free to do this if you wish.......

 

[youbet]

To disagree, they will need to crunch the numbers themselves to find the difference if any.......

They've already done this. Their calculation is that the cost basis is zero. You need to prove that it is >zero. Doesn't seem "fair," but that's the way it is.

OP - I've read that reason often prevails, especially for relatively small amounts. Do some research and take an educated, conservative guess and I'll bet you'll be fine.

Do you at least know the amount and date of your original purchase?

 

[youbet]

Fiduciary tracking takes away this problem going forward. It's past div and CG reinvestment that's the prime cause of the difficulty. An original purchase might have happened long ago but at least it's only one number to dig out. Quarterly, or the dreaded monthly reinvestments, multiplies the figuring. I don't know when MFs began offering automatic reinvestment, 1960s maybe?

My brokerage has always tracked my basis in MF's including all reinvestments of divs and CG's. When I still received paper statements, the annual report was called a Gain/Loss report and it showed both realized and unrealized gains. These days the info is there on line right in your face every time you open your account.

Are you sure your brokerage doesn't have this info for you? Did they not send you Gain/Loss reports at the end of each year?

You could easily solve this by passing away (peacefully of course). The cost basis will be stepped up to the value of the shares on the day of your death and your heirs will go on from there.

 

[ERD50]

Originally Posted by ERD50 View Post
they ought to make you report the cost basis of all assets, every year (whether you sold any or not).

You're free to do this if you wish.......

Well, I actually do have this info for myself now, but I did have to jump through some hoops when I was younger, and less informed. I sold a fund in several steps, and had been reinvesting divs for years. It just seemed like an overly arduous task. That's one reason I suggest people do not reinvest divs (though brokers track this now, I still think -keep-it-simple, plus I think it is best to actively decide where to reinvest as part of any AA re-balance).

But my bigger issue is this is an area ripe for cheating. Unless you get audited, the IRS won't really know if your cost basis is accurate. Especially if you use 'various' for the purchase date, and the number is in the realm of possibility for a long term holding period ( if you don't claim $100 basis if the stock was never there in that time frame). That must be tempting for a lot of people.

The only outstanding issue I have is figuring and documenting cost basis on my home. I need to work on that, but every time I do, I get bored and move on to something else. I'm pretty sure I fall into an age where the rules changed, but I think I go backwards on my home sales from when I sell this home using the current rules.

... You could easily solve this by passing away (peacefully of course). The cost basis will be stepped up to the value of the shares on the day of your death and your heirs will go on from there.

I was going to suggest this also, just wasn't sure of it was too morbid!

But wow, in my FIL's case, they had stocks they inherited in early 1960s. Tracking those back for costs basis would have been a real chore (splits, mergers), but they were all stepped up, so that problem went away. Although, a cost basis of zero might not have been all that far off in practical terms?

-ERD50

 

[gauss]

I have always used Yahoo Finance's Historical feature to research these issues. I am surprised that nobody has mentioned this yet. Of course OP will need to know all of the outright purchases that were not re investments.

For free you can get the prior 10 years of IRS tax return transcripts. The return transcript and the 1099-W2-5498 transcripts are both available.

For a fee you can get actual photocopies of your returns from the IRS too, but I have not first hand experience with this.

Also if Yahoo Finance doesn't work out, if these funds are SEC registered (as opposed to private placement investments available only too Accredited Investors (ie high net-worth)), wouldn't there be a record of the disclosures which would be available on the EDGAR SEC database at least for recent years?

The other thing that you may notice for the really old transactions is that there may not be much difference between the true basis and a 0 basis if the investments were good and have grown exponentially like the market as a whole over the decades.

If OP has more money than time/interest in tracking this down perhaps a professional tax accountant could be of assistance. Perhaps start with one with experience in records reconstruction?

Also as others have said, if you donate cash to charity, consider donating the investments that you don't want to mess with the basis. You get a Schedule A deduction for FMV on the date of the donation. Charity gets the funds. IRS does NOT get paid the CG taxes that would have been due otherwise. If you have too much of a chunk that you wan't to donate at once, consider establishing a Donor Advised Fund such as Fidelity Charitable. This can separate your donations - tax timing from the actual final charities receiving donations. The minimum donation amount at Fidelity Charitable is $50. A $5,000 initial contribution is required to open the account however.


-gauss
"Retired engineer who plays with accountants these days..."

 

[sengsational]

I have always used Yahoo Finance's Historical feature to research these issues. I am surprised that nobody has mentioned this yet. Of course OP will need to know all of the outright purchases that were not re investments."

I was about to mention that. Given an initial balance of MF shares on a specific date, you could run the report with 'dividends only' up through the date where the fiduciary started keeping track. Dump that into a spreadsheet and you'd have it.

But what I find annoying is that they don't let you discount it by inflation. So if your asset just kept up with inflation (is worth today what it was when you bought it), you still have to pay taxes on these gains that aren't really gains.

 

[GrayHare]

I have always used Yahoo Finance's Historical feature to research these issues. I am surprised that nobody has mentioned this yet. Of course OP will need to know all of the outright purchases that were not re investments.

That feature sounds like a possibility. I've found my way to the "Historical Data" link for a fund, but it doesn't want to work for me (there are no data input fields). When working, does it display MF dividend and CG data from 30+ years ago?

 

[sengsational]

I just did Southern Company on Yahoo and saw dividends from 1982.

Before that, you'd need to pull old "Baron's" newspapers from your library.

 

[Clone]

Many years ago I was involved with an employee stock purchase plan. You could put a few percent in, and the company would match it with some money. So you would buy maybe $50 worth of company stock every 2 weeks.

It was an after tax account, and we would dip into it on occasion to pay major expenses or whatever. What a nightmare! This was before spreadsheets, and you had to track each of these purchases to figure out which shares were long term or short term, what the cost basis was, and then keep track of what had been sold. I can't remember what happened with the dividends. I think they reinvested, which meant more line items to track.