Tax Question??

[shadowkat]

Spoke too soon. Have a question - does anyone out there understand how to figure out a
"cost basis"? If you don't know what it is, you don't know.

Comments

[rebekahroxanna.livejournal.com]

Is it stock? Did you buy it all at once? Have you reinvested dividends? Has the stock split? Was it a gift or an inheritance?

I use the cost basis my mutual fund company gives me. It's just easier than trying to figure everything out (and with mutual funds it gets really complicated because you pay tax on the capital gains that are reinvested and then increase your basis). There's also the matter of matching purchases and sales and as I recall you have to use the same scheme every time (match first purchase with first sale or last purchase with first sale, but I may be confused.)

[shadowkat67.livejournal.com]

It's from the exercise of stock options. The sitch: I was granted stock options in 2004. When I got laid off in 2006, I had 30 days to exercise or lose them, so exercised. The broker, E-Trade, provided me with a 1099 form with the gross proceeds listed, but not however the "gain" or the "cost basis", when I asked for their help today, they patiently explained they were not equipped to provide that information or allowed to and told me to contact the IRS for help. (Note to self, unless given no other choice NEVER use E-Trade again. B/c other brokerage firms obviously do this. I'm furious at them at the moment.) Anyhow - I'm looking at my settlement statement and trying to figure out: is the cost basis the "amount paid to the company in exchange for the stock - ie. Option price plus total tax", is it the "W-2 Income?" Is it just the Option price? Is it the Option price plus the fee?
Is it the total sale price? What is it???

[rebekahroxanna.livejournal.com]

OK, this is really complicated--beyond my expertise (or lack thereof). Try http://www.irs.gov/taxtopics/tc427.html. The problem with talking to the IRS is that they have a high error rate (you'd think they'd be able to answer questions, but they aren't always right.) If you don't understand the irs publication, then you need to find an accountant.

[shadowkat67.livejournal.com]

Thanks. Tried the Irs. Didn't work. Decided to try one more avenue -
my old broker who did figure it out last year - I'm asking them what they did. Because it should be exactly the same calculation.

[cactuswatcher.livejournal.com]

As far as I know it's the Option price plus the fee. The taxes don't count.

[embers-log.livejournal.com]

I always had a tax accountant determine it for me, basically it is the difference between the original value of the stock (or mutual fund) and the value when you sold it, in order to determine how much you owe for Capital Gains... but you should be able to deduct fees etc...
Google had some good sites:
http://www.investopedia.com/ask/answers/05/costbasis.asp
http://www.irs.gov/faqs/faq-kw34.html
http://mutualfunds.about.com/od/taxes/a/basis.htm
I know...you probably googled it your own self.

[shadowkat67.livejournal.com]

I may have to do that, since stupid wonky company failed to separate it out and stupid brokerage company is too lazy to figure out capital gains/losses or for that matter a cost basis. Ugh! Last year, nice
company (the one that got acquired by wonky train-wreck company) did do it right, as did nice company's brokerage firm (Fidelity).

Note: NEVER use E-Trade - they are idiots. Fidelity is much better in comparison.

[cactuswatcher.livejournal.com]

The cost basis is basically what you paid for it. Depending on what you have you may have to reduce that, if you've gotten any of your original cost (the principle) back through payments at any time you've had it. If you have stock and it split, the cost now covers all of the shares not just the ones you originally had, and there can be complications with that as well.