Reporting stock sales

[firewhen]

Has anyone had problems with the IRS in the past? I bought a stock years ago and it spun off a company that then spun off another company and those shares were sold this year. Not that I want to make anything up on my original basis, but I don't know how easily I could come up with it, let alone whether the IRS would ever question it or audit it. The total dollars are under $10,000 so the gain is obviously no more than a piece of that. Do I try my best/wing it or really try to accurately calculate and report the gain?

[RetireeRobert]

Quote:

Originally Posted by firewhen Has anyone had problems with the IRS in the past? I bought a stock years ago and it spun off a company that then spun off another company and those shares were sold this year. Not that I want to make anything up on my original basis, but I don't know how easily I could come up with it, let alone whether the IRS would ever question it or audit it. The total dollars are under $10,000 so the gain is obviously no more than a piece of that. Do I try my best/wing it or really try to accurately calculate and report the gain?

Try contacting the investor relations department of the current surviving company. More likely than not, they will be able a to help you figure out per share basis cost if you can come up with an original purchase date(s). Some companies, where there have been lots of stock splits and such, even have basis calculators on their web sites.

As to reporting to IRS, "accurate" is always the first choice.

[SecondCor521]

Three choices:

1. Do it right, track your basis, report it accurately. Easier said than done; that's partly why I let my ex take all the stock ;-).
2. Report $0 basis, make the IRS happy.
3. Take your best guess, write down what you were thinking and how you came up with your numbers in case the IRS audits you.

2Cor521

[kaneohe]

you might a Google search. Here's an example that I got by googling
"agilent verigy spinoff"......Agilent Technologies spun off Verigy.
Verigy Ltd. - Verigy Share Distribution - Oct. 31, 2006

It gives the terms of the spinoff. Typically you also need to find the share prices
of the 2 companies immediately after the spinoff. You will know the date of the spinoff (hopefully) from your first search. Then you can do another search for "historical stock prices" and find those prices so you can assign the original basis between the 2 companies (proportion according to their value immediately after spinoff=
# shares x share price). Repeat for the other spinoff.

[youbet]

Quote:

Originally Posted by firewhen Has anyone had problems with the IRS in the past? I bought a stock years ago and it spun off a company that then spun off another company and those shares were sold this year. Not that I want to make anything up on my original basis, but I don't know how easily I could come up with it, let alone whether the IRS would ever question it or audit it. The total dollars are under $10,000 so the gain is obviously no more than a piece of that. Do I try my best/wing it or really try to accurately calculate and report the gain?

Are you saying you don't know what you paid for the original stock years ago? Or is it the sequential spin offs that are confusing you?

1. I'd make a serious effort to determine your actual basis accurately. Other posters have given you some tips on doing this and there really is more information out there than you might think.

2. If that fails and you need to make some assumptions, make the assumptions reasonable and document them in your records so that if you have to explain how you came up with the number a year or two or three from now, you can.

[RunningBum]

I keep a spreadsheet with the basis of all of my held stocks. When a spinoff occurs, I look for the announcement of what the basis split between the two is, and update my spreadsheet and make notes, and print a copy of the announcement for my files.

It's a bit tougher to do this later, but as others have said, investor relations should be able to help. Another way is to ask on the individual stock message boards at M* or Yahoo. Other people who own the stock will be keeping track of it. Ask for a link to the information so you can see where they got it from and have more confidence in it.

Another way is to use stock history charts to see the price of the original stock the day before, then the price of both stocks the next day. It may not be exact, but it'll be close enough. Be sure to account for your entire original basis. If you originally bought stockA for $10K, make sure the new stockA/stockB split adds up to $10K, like $7k/$3k.