"bill" <bw1945[at]nospamnow.com> wrote:

- quote -

Let's clear up a common misconception here. The IRS didn't
make the rules. Congress did. Additionally, in this case,
the rules are simple and clearly stated.

Gary

--
The above address is fake. If you want to contact me
directly, please send an e-mail to: gary at gdgoodman dot com.

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Tks so much all, really appreciate the help. Am convinced
more than ever that the IRS really wants people to cheat so
they can use enforcer powers on the exhausted folks out
there.

bw

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an_ordinary_guy_158[at]hotmail.com (Bill) posted:
- quote -

That was wrong. I got caught up in the math problem, and
forgot the *law* -- something which one should never do.

Fortunately, there were multiple cooler heads who set you
straight.

Bill

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an_ordinary_guy_158[at]hotmail.com (Bill) wrote:
- quote -

Since the OP is asking about shares of stock, not shares of
a mutual fund, this is incorrect. Average cost is only
allowed on sales of mutual funds; with stock, you must
determine the cost basis of shares sold. Unless the OP told
the broker which shares were being sold, he sold 65 of the
100 shares in his original purchase.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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"bill" <bw1945[at]nospamnow.com> wrote:

- quote -

You use specific identification. there were specific shares
purchased with each reinvested dividend. Your broker can
give you the information, or you can visit the company's web
site and get the dividen history there along with share
prices adjusted for splits.

--
Bruce Raskin, CPA, P.C.
Braskincpa[at]wbhsi.net
Tax and accounting Services
Chandler, AZ


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"bill" <bw1945[at]nospamnow.com> wrote:

- quote -

fifo or specific identification

--
<<< Benjamin Yazersky CPA [NJ & NY] > > ---> real address on hobokenx or hobokeni <---

The foregoing is intended for educational purposes only
and does NOT constitute legal OR professional advice

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"bill" <bw1945[at]nospamnow.com> wrote:

- quote -

You can't use average cost for stock. The cost method defaults to FIFO
(first in, first out) unless you identify the shares you are selling
*BEFORE* selling them.

It appears that you didn't identify the shares, so you sold
65 of your original shares.

65/100 * whatever you paid 10 yrs ago = your tax cost basis.

Gary

--
The above address is fake. If you want to contact me
directly, please send an e-mail to: gary at gdgoodman dot com.

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bill wrote:

- quote -

In the US, you don't use average cost for stocks. If you are
going to sell your entire position, then average basis times
the number of shares sold would work out the same. Otherwise
you are selling specific shares. And if you did not identify
which shares when you sold, they are the oldest.

- quote -

Use 65% of what you paid for the first 100 shares as your
acquisition cost. Record the basis of 35 shares that would
be the next 35 you sold.

Microsoft Money and Quicken are good at recording the
purchases and producing the basis info you need at tax time.
If you are going to do this by hand, it might be good to
either leave the dividend reinvestment program to keep from
digging deeper (unless your plan provides you with basis
information somehow), donate those shares to charity , or
have them in your estate when you die (at which time capital
gains are forgiven).

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bill wrote:

- quote -

Unless you designated the shares to be sold aforehand, it's
the old "fifo" approach.

ChEAr$,
Harlan Lunsford, EA n LA
Mon 20 Feb 2006 [at] hh

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"bill" <bw1945[at]nospamnow.com> wrote:

- quote -

You're only allowed to use average cost basis for mutual
funds, not individual stocks and bonds. For stocks and
bonds, you must compute the actual cost basis of the shares
you sold.

- quote -

If you didn't designate which shares you sold, you're
presumed to have sold the oldest shares. Assuming this is
the first time you've sold any of these shares, the cost
basis is 65% of what you paid (including commissions) for
the original 100 shares.

You need to hold on to all the statements showing the
reinvested dividends so you can calculate the cost basis of
those shares when you eventually sell them. If you've lost
them, you may be able to call shareholder services, or maybe
even go online to their web site, and they'll send you a
statement with all the reinvestments.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***

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"bill" <bw1945[at]nospamnow.com> writes:

- quote -

No. Average cost methods are NOT allowed with any
securities other than shares of mutual funds.

- quote -

By default all securities sales are first-in-first-out. In
other words, you sell the oldest first. So in your example,
unless you validly identified which shares are being sold,
you sold 65sh of the 100sh bought ten years ago.

You can overcome the default presumption by making a valid
identification of the shares sold. You do this by telling
your broker AT OR BEFORE the time of sale (you CAN'T do it
after the fact) which shares you are selling and have your
broker echo this designation back to you *in writing*.

See:
http://fairmark.com/capgain/ident.htm

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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bw1945[at]nospamnow.com (bill) wrote:

- quote -

You should take your cost basis for the original share
purchase, then add the value of all capital gains purchases
(assuming you correctly paid taxes on the CG distributions
when received). Then take that new total cost, and divide
it by the 130 shares you owned before the sale. That would
provide you the cost-per-share, which you would then
multiply X-the-number of shares sold [65, in the example
posed].

Bill

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- quote -

The use of "average cost" as basis is restricted to mutual
funds - you cannot use it for stocks. In your case, since
you apparently didn't specify to your broker exactly which
shares you wanted sold, the assumption is that you sold 65
of your original shares. So you use the price per share that
you originally paid ten years ago.

--
Don EA in Upstate NY

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bill wrote:

- quote -

There is no such formula for determining the "average cost
basis" of STOCK shares, as that method of determining cost
basis is forbidden.

The cost basis of the shares sold is simply the total cost
basis of EACH share. The default method for sales is FIFO
(first in, first out) where the oldest shares are sold
first. In your example above, that would be 65 of the 100
shares purchased 10 years ago (i.e. [original purchase price
x 65]/100 ). These would all be long term.

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I am a lil familiar in determining avg. price pre share with
mutual funds(for those fund companies that don't provide it)

However, is the formula for determining avg. cost for shares
of stock with reinvested dividends the same method as mut.
funds?

If I bought 100 shs of XYZ 10 yrs ago and reinvested
dividends created another 30 shs over time and sold 65
shares, how do I determine the cap gains?

tks all

bill w

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