Author Topic: Does anyone really know their cost basis?  (Read 1759 times)

BTDretire

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Does anyone really know their cost basis?
« on: April 20, 2019, 07:47:08 PM »
 Hi all,
 I started investing in the early 80s.
I bought some mutual funds and sold some funds and bought other funds, and then sold those funds
until finally sometime in the late 90s I put almost everything into VTSAX.
 Does anyone really know their cost basis going back 38 years?
 What are you supposed to do?

MDM

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Re: Does anyone really know their cost basis?
« Reply #1 on: April 20, 2019, 08:31:18 PM »
No need for the cost basis on anything you sold in the 90s.

All you need is the cost basis on anything you currently own.  Do you have that?

Telecaster

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Re: Does anyone really know their cost basis?
« Reply #2 on: April 21, 2019, 12:07:31 AM »
Back in the day, I inherited some PacifiCorp shares from my grandad.  I knew 0.0 about the stock market or investing in general, but it paid a $100 dividend every quarter, which was pretty cool.  But I was just smart enough to see they had a DRIP and I signed up for that, realizing the $100 was cool, but not life changing.  That went on for a while, then PacifiCorp was bought out by Scottish Power, which didn't have a DRIP, so I got the dividends again.    Then for some reason, PacifiCorp got sold, and for some reason I got some cash with that deal, but I still had Scottish Power stock, until Scottish Power was bought by Iberdrola.   The Iberdrola DRIP has worked intermittently on a schedule I can't figure  out. 

I'll be damned if I know what my cost basis is.  I'll be damned if I even know how to begin to figure it out.  Yes, I should have been keeping the paperwork all these years, but I didn't know enough and I didn't. 

secondcor521

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Re: Does anyone really know their cost basis?
« Reply #3 on: April 21, 2019, 12:30:21 AM »
In theory, people are supposed to keep track of their basis.  In practice, it's hard.

My Dad owned AT&T from the 1960's through at least the 1990's, so at some point he got shares in one of the baby Bells, which later merged with some of the other baby Bells I think.  Eventually one of the baby Bells bought  AT&T I believe.  I think he may have been in the DRIP at one point.

For a while I participated in the DRIP for HPQ (back when it was HWP).  Each quarter, my dividend bought a small block of shares.  The next quarter, my original shares paid a dividend which bought a small block of shares.  But that next quarter, the block of shares from the previous quarter's dividend also bought a tremendously tiny block of shares.  And so forth.  And then HP spun off Agilent, which took some fraction of the basis from all of those blocks of shares.

Eventually there are only a few choices:

1.  Become a spreadsheet and basis guru.

2.  Give the stock to charity.  Charity sells it and nobody cares about the basis at this point because of the law on shares gifted to charity.

3.  Bequeath the shares at death in a taxable account.  Heirs restart the basis with date of death values and then they try to keep track of it.

4.  Research the basis with the help of the brokerage firm or custodian.

5.  Guess or approximate the basis.

6.  Give up and use zero basis.

7.  For shares purchased after a certain date, rely on the brokerage firm to keep track for you.

HipGnosis

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Re: Does anyone really know their cost basis?
« Reply #4 on: April 22, 2019, 07:52:56 AM »
I totally do.  I've always kept records of my transactions.
Irrgardless, your broker does.

Car Jack

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Re: Does anyone really know their cost basis?
« Reply #5 on: April 22, 2019, 12:31:12 PM »
I know the basis of everything in taxable (it's actually very easy to see and to to tax loss harvesting, it's pretty key to know).  In tax advantaged accounts.....who cares?

Monkey Uncle

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Re: Does anyone really know their cost basis?
« Reply #6 on: April 26, 2019, 06:56:56 AM »
I started investing in a taxable account in the mid 90s.  And yes, I've kept track of the basis for everything in a spreadsheet since day 1.  Every purchase, sale, and dividend/cap gain reinvestment.  It's not that difficult if you know from the beginning that you need to do it.  Of course nowadays the brokers keep track of it for you.  But for any investment that is more than about a decade old, if you didn't track it yourself from the beginning, you're pretty much reduced to guessing.

FIREstache

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Re: Does anyone really know their cost basis?
« Reply #7 on: April 26, 2019, 03:04:00 PM »

I never kept track of my cost basis going back to my Vanguard investments in 2008 because it always kept track of them for me.  Those funds also show covered and noncovered shares with the cost basis for each.  Aren't these numbers reliable to use?

Telecaster

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Re: Does anyone really know their cost basis?
« Reply #8 on: April 26, 2019, 03:17:37 PM »

I never kept track of my cost basis going back to my Vanguard investments in 2008 because it always kept track of them for me.  Those funds also show covered and noncovered shares with the cost basis for each.  Aren't these numbers reliable to use?

They are reliable, but back in the day [kaff, wheeze] they didn't keep track of that stuff.  You had to keep track of it.   If you were too dumb to know that (raises hand) then you are in a bit of a pickle.   

ixtap

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Re: Does anyone really know their cost basis?
« Reply #9 on: April 26, 2019, 03:20:31 PM »

I never kept track of my cost basis going back to my Vanguard investments in 2008 because it always kept track of them for me.  Those funds also show covered and noncovered shares with the cost basis for each.  Aren't these numbers reliable to use?

They are reliable, but back in the day [kaff, wheeze] they didn't keep track of that stuff.  You had to keep track of it.   If you were too dumb to know that (raises hand) then you are in a bit of a pickle.

Don't worry, I just about made a comment about my passbook savings on another thread.

Did they at least track dates? I don't know my cost basis for anything, but I know how to look it up.

MDM

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Re: Does anyone really know their cost basis?
« Reply #10 on: April 26, 2019, 03:23:09 PM »
Those funds also show covered and noncovered shares with the cost basis for each.  Aren't these numbers reliable to use?
Maybe.

In the end, you are responsible for the accuracy of the cost basis.

When shares are sold, on form 1099-B
- for covered shares, the brokerage reports the basis to the IRS.  You can accept that number, or change it with an accompanying explanation.  E.g., see Your 1099-B form for an ESPP sale will probably be wrong.
- for noncovered shares, no basis is reported to the IRS.  You can choose to use whatever Vanguard has in the detail section of your year-end report (if it has any basis numbers at all), or use a different number if you have good reason.


Monkey Uncle

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Re: Does anyone really know their cost basis?
« Reply #11 on: April 26, 2019, 06:49:20 PM »
All of this discussion raises an interesting question.  What if you don't have any documentation of your basis, so you make your best guess, and then you get audited?  Neither you nor the IRS can prove what your actual basis was.  Surely you don't have to assume a basis of zero.

MDM

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Re: Does anyone really know their cost basis?
« Reply #12 on: April 26, 2019, 07:34:10 PM »
Surely you don't have to assume a basis of zero.
According to p.44 of https://www.irs.gov/pub/irs-pdf/p550.pdf, "You continue to have the burden of proving your basis in the specified shares at the time of sale or transfer."

See How to Calculate a Cost Basis For Your Stock for some thoughts on how to do that.

secondcor521

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Re: Does anyone really know their cost basis?
« Reply #13 on: April 26, 2019, 10:11:14 PM »
All of this discussion raises an interesting question.  What if you don't have any documentation of your basis, so you make your best guess, and then you get audited?  Neither you nor the IRS can prove what your actual basis was.  Surely you don't have to assume a basis of zero.

I don't know the exact legal standard, but if you make a good faith estimate based on whatever partial knowledge you have, then the IRS may go along with it.

So if you know a stock was purchased mostly in 1964 through 1968, and then some more shares were bought in 1980, then you could say that you figure about 90% of it was bought in the 60's, and there were five years, so you take 90% * # of shares / 5 years * year end stock price in 1964, 1965, etc. and then 10% * # of shares * year end stock price in 1980, they would maybe accept that.

You couldn't just say, well, it was bought a long time ago but I guess the basis was at least $25 per share.

Miss Prim

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Re: Does anyone really know their cost basis?
« Reply #14 on: May 03, 2019, 01:12:32 PM »
In theory, people are supposed to keep track of their basis.  In practice, it's hard.

My Dad owned AT&T from the 1960's through at least the 1990's, so at some point he got shares in one of the baby Bells, which later merged with some of the other baby Bells I think.  Eventually one of the baby Bells bought  AT&T I believe.

I had the same problem with Baby Bell stocks gifted to my kids in the 1990"s by their grandfather!  When they sold them to purchase homes, I had to figure out their tax basis because I do their tax returns.  Thank goodness my husband wrote down what each share price was at the time of inheritance!  AT&T has a calculator on their website and I half-assed tried to figure out the cost basis for each stock.  The baby bells ended up all merging back together to only a few companies like Verizon, Vodafone, AT&T, ect.  I vote for just guesstimate!

Most of my "stache" is in IRA's and other tax-deferred accounts which makes for easy tax returns. 

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stoaX

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Re: Does anyone really know their cost basis?
« Reply #15 on: May 03, 2019, 02:03:52 PM »

I never kept track of my cost basis going back to my Vanguard investments in 2008 because it always kept track of them for me.  Those funds also show covered and noncovered shares with the cost basis for each.  Aren't these numbers reliable to use?

They are reliable, but back in the day [kaff, wheeze] they didn't keep track of that stuff.  You had to keep track of it.   If you were too dumb to know that (raises hand) then you are in a bit of a pickle.

My hand is up as well.