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  1. Default Calculating Capital Gains and Losses

    An example.

    I start by buying 100 shares at $10 and set up a DRIP ($1000 cost basis). (Let's remove broker fees to keep the math simple)

    In quarter 1, I receive a dividend of $18 which magically gets me 2 additional shares at $9 ($18 + $1000 = $1018 cost basis).

    In quarter 2, I receive a dividend of $44 (crazy increase!) which magically gets me 4 additional shares at $11 ($44 + $1018 = $1062 cost basis)

  2. Default

    Now let's say the share price drops to $10 again (106 x 10 = $1060) and I sell my entire position.

    How do I report it? Do I report it as a $2 loss overall or do I report it as a gain for the shares purchased at $9, and a loss for those purchased at $11?

  3. Default

    How does the answer get more complex if I sell 50 shares of the position. I think I read somewhere that it operates FIFO?

    Thanks for your help. Looking forward to making contributions to the community.

  4. #4

    Default

    Well it depends how you want to report them. This year the IRS has made it simple to like same securities on the 8949 form in a group. As long as these sells were A) reported on the 1099-B from your broker, and B) none of these resulted in a wash sell.

    Your 1099-B should have your total cost and total proceeds broken down for each transaction as well as that "group" of the same security. So it is up to you how you want to report it. Either way will result in the same net gains/losses. One just will require less form filling out.

    On your second part it is FIFO but some brokers will allow you to designated which tax lot for at least up to 3 days (till settlement) on which tax lot you wanted to sell out of.

  5. Default

    There is no need to calculate your gain/loss for tax reporting purposes as all firms are now required to provide cost basis on 1099's.

 

 

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