"unfrostedpoptart" <david[at]therogoffs.com> wrote:

- quote -

The basis for stock bought with dividends is the amount of
the dividend that was used to buy those shares or fractional
shares. Enter each one separately on Sched D. You will also
have to enter the dividends in schedule B as income.

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- quote -

You seem to have sold all the shares at the same time, so
you report the entire sale as a single transaction. In the
description show the total number of shares that you sold.
The number of shares you started with doesn't matter. The
basis is the amount your wife paid for the original
purchase, plus the dollar amounts of the dividends that
were used to purchase additional shares.

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unfrostedpoptart wrote:

- quote -

Do you have the 1099-DIV forms that the company sent each
year? That would be the amount. If you lack that, there may
be an available record of dividends on that stock, from
which you could reconstruct the happenings. Care to name the
stock?

In a few cases, the company involved can provide the basis
information. I suggest you ask.

To complicate this somewhat, the last purchases would be
short-term capital gains, and the ones over a year before
you sold would be long term gains.

The plan would be to figure out how many shares were added
in the last year, and enter that as one entry with date
acquired as "various". In the basis column, enter the total
of the dividends that were used to buy shares in that last
year. In the cost, prorate the money you received from the
sale. That program has a selection in the last column of the
schedule D worksheet that lets you mark that as short term.

The older shares would be another entry. Mark that as long
term.

You can use more lines if you have more detail to enter, but
you need at least two.

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"unfrostedpoptart" <david[at]therogoffs.com> wrote:

- quote -

I believe the cost basis of those shares would be equal to
the value of the dividends. It may be simpler,
conceptually, to treat each automatic purchase as a separate
transaction. You are add the dividends to the cost basis of
all your shares.

If I understand what you write, all of your transactions
would be short-term.

You cost basis would be the cost of your initial purchase,
less transaction fees (commission), plus the value of any
dividends received that were reinvested.

On TaxCut, since from what you post it seems as if all of
the transactions were short-term, I believe you would enter
VAR-S in the Date Acquired block of the Capital Gains and
Losses worksheet. If some are long-term, then you have to
split that up. See the instructions for that form..

--ron

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"unfrostedpoptart" <david[at]therogoffs.com> wrote:

- quote -

The cost basis of the additional shares is the dividends
that were used to purchase them. There's nothing magic
about reinvested dividends, they're treated (taxwise)
exactly as if you'd received a check and simultaneously
written a check for the same amount in order to purchase
more shares.

So find your dividend statements and add the dividends to
your cost basis.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA

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unfrostedpoptart wrote:

- quote -

Your cost basis in the shares that were purchased with
dividend reinvestment is what you paid for those shares
------> the dividend received!

--
Alan
http://taxtopics.net

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"unfrostedpoptart" <david[at]therogoffs.com> wrote:

- quote -

The basis of the new shares is equal to the amount paid for
them (i.e., the amount of dividend income you reported on
Schedule B). It's all short-term capital loss so you could
use one line for the entire set.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

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"unfrostedpoptart" <david[at]therogoffs.com> wrote:

- quote -

The dividends are income on line 9 of your return. They
also add to your basis. Since you sold all shares you enter
the total number of shares sold, "various" as the date
acquired, the initial investment plus the reinvested
dividends as the basis on line 1 of Schedule D.

--
Phil Marti
Clarksburg, MD

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david[at]therogoffs.com wrote:

- quote -

You should have received a 1099 from the company (or broker)
for the dividends. Simply take the amount of that dividend
total and add it to the cost basis for the total stock.
Since you seem to have sold _all_ shares you possessed, that
is the simple formula for handling this issue. (Note: Had
you retained part of the stock holding, it would be more
complicated.)

When entering on your Schedule D (as a short-term event,
since they were bought *and* sold within the year 2004),
simply enter the name of the stock, date of original
purchase and date of sale, proceeds of sale, and then cost
basis _including reinvested dividends (which you should be
reporting on Schedule B). Alternatively, some programs will
permit you to enter VARIOUS for the purchase date, and so
long as you're specifying a short-term activity, that would
be acceptable.

(A purist view would hold that the "reinvestments" were
separate purchases -- and if you were entering the exact
number of shares sold [e.g., 342.65 Sh], this would be
technically necessary. But since you are reporting purchase
and sale of your entire _position_ in the stock, IMO this is
unnecessary.)

Bill

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I'm doing my own taxes for the second time now, using
TaxCut. I understand most of it (I think), but I'm lost on
one issue and hoped someone could give me a hand. It has to
due with stock purchase/sales.

I have some stock my wife bought early in 2004 and sold, at
a loss, late in 2004. So far, I understand how to deal with
it (cost basis at purchase, sale price). Here's where I get
lost: The stock generated dividends during the year. These
automatically were used to purchase more shares (actually,
fractions of shares). So, where we go to sell it all,
there's more shares than we started with. I don't have a
clue how to enter these fractional share or what their cost
basis would be to calculate the loss.

Many thanks in adavance!

David

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