Mut Fd Sales

I purchased shares in 2 Mutual funds in 1986 and sold both of them this
year. I reinvested all dividends for the first 10 years and have taken
dividend checks ever since 1996. I have never sold any shares till selling
all of them all this year. I've paid taxes on all dividends since 1986. My
taxes are relatively simple and I've always done my own. Is there some
simple program or formula I can use to assess my tax liability on these
sales without my going to a tax preparer or accountant?

Tom G

Re: Mut Fd Sales

gib wrote:
>
> I purchased shares in 2 Mutual funds in 1986 and sold both of them this
> year. I reinvested all dividends for the first 10 years and have taken
> dividend checks ever since 1996. I have never sold any shares till
> selling all of them all this year. I've paid taxes on all dividends
> since 1986. My taxes are relatively simple and I've always done my
> own. Is there some simple program or formula I can use to assess my
> tax liability on these sales without my going to a tax preparer or
> accountant?

Yes. The cost basis of what you sold (total of all your shares) is what
you paid in 1986, plus the amount of dividends you reinvested between
1986 and 1996. The proceeds is what you got for all your shares when
you sold. All gains are long term, because the last shares you bought
were purchased in 1995 or 1996 (certainly more than a year ago).

So you just report:

Property Sold Acquired Sold Sales Price Cost Gain/Loss
Fund 1 various 2006 date proceeds total cost diff
Fund 2 " 2006 date proceeds total cost diff

("Various" is exactly the word you fill in for date acquired.)

On your Federal return, the gain will be taxed at 15% (unless you are in
a low tax bracket, in which case it could be 5%). State tax amount
depends on state.

As usual, this is not tax advice, and you should ensure that what you do
is correct for your particular situation.

--
Mark Freeland

Re: Mut Fd Sales

"gib" <~@~.com> wrote in message
news:y66Af.3572$
>I purchased shares in 2 Mutual funds in 1986 and sold both of them this
> year. I reinvested all dividends for the first 10 years and have taken
> dividend checks ever since 1996. I have never sold any shares till selling
> all of them all this year. I've paid taxes on all dividends since 1986. My
> taxes are relatively simple and I've always done my own. Is there some
> simple program or formula I can use to assess my tax liability on these
> sales without my going to a tax preparer or accountant?
>
> Tom G

What you paid, including reinvested distribution, is your cost basis.
What you sold your funds for minus the cost basis is your taxable gain.

Any shares sold that were over 12 months old are long term sales, anything
that you owned for less than 12 months are short term sales.

Re: Mut Fd Sales

If you have good records of your taxes and mutual funds;
have done your own taxes for years; and are handy with a
spreadsheet, this should not be too difficult. The big
caveat is to make sure you don't pay taxes for 2005 (or
2006? can't quite tell below) on the various distributions
from 1986-1995. You should have already paid taxes on these
each tax year from 1986-1995, like you say below. For a
pretty good introduction, see:


tm





The "average cost basis" method is probably the easiest to
use.

"gib" <~@~.com> wrote
> I purchased shares in 2 Mutual funds in 1986 and sold both
of them this
> year. I reinvested all dividends for the first 10 years
and have taken
> dividend checks ever since 1996. I have never sold any
shares till selling
> all of them all this year. I've paid taxes on all
dividends

To be precise, I suspect you mean "distributions" here. From
1986-1995, these distributions were likely recorded on Sch.
D each tax year, on a line dedicated to mutual fund and
similar distributions. This is why you need your old tax
records.

> since 1986. My
> taxes are relatively simple and I've always done my own.
Is there some
> simple program or formula I can use to assess my tax
liability on these
> sales without my going to a tax preparer or accountant?

Re: Mut Fd Sales

"Oop Ack Brrak" <> wrote in message
news:I08Af.3610$
> If you have good records of your taxes and mutual funds;
> have done your own taxes for years; and are handy with a
> spreadsheet, this should not be too difficult. [...]

> The "average cost basis" method is probably the easiest to
> use.

The cost basis method doesn't matter, as the only figure required in the
OP's situation is total cost basis (for the total shares sold). You appear
to believe that cost basis for each share is needed for taxes. It isn't for
the OP, who simply works with aggregate cost. Don't make things harder than
they need to be.

By writing that the OP has good records, you are suggesting that the OP is
doing his own calculations, and not relying upon the fund's cost
calculations. That's the best recommendation, as funds always say that any
cost information they provide is informational only, and not to be relied
upon for tax purposes.

Fidelity writes: "Cost basis (and related gain and loss) information made
available to you is not intended, and should not be construed as legal or
tax advice. Fidelity makes no warranties with respect to, and specifically
disclaims potential liability resulting from, tax positions which you might
have taken in reliance on such information."

--
Mark Freeland

Re: Mut Fd Sales

"Mark Freeland" <> wrote in message
news:
> gib wrote:
> >
> > I purchased shares in 2 Mutual funds in 1986 and sold both of them this
> > year. I reinvested all dividends for the first 10 years and have taken
> > dividend checks ever since 1996. I have never sold any shares till
> > selling all of them all this year. I've paid taxes on all dividends
> > since 1986. My taxes are relatively simple and I've always done my
> > own. Is there some simple program or formula I can use to assess my
> > tax liability on these sales without my going to a tax preparer or
> > accountant?
>
> Yes. The cost basis of what you sold (total of all your shares) is what
> you paid in 1986, plus the amount of dividends you reinvested between
> 1986 and 1996. The proceeds is what you got for all your shares when
> you sold. All gains are long term, because the last shares you bought
> were purchased in 1995 or 1996 (certainly more than a year ago).
>
> So you just report:
>
> Property Sold Acquired Sold Sales Price Cost Gain/Loss
> Fund 1 various 2006 date proceeds total cost diff
> Fund 2 " 2006 date proceeds total cost diff
>
> ("Various" is exactly the word you fill in for date acquired.)
>
> On your Federal return, the gain will be taxed at 15% (unless you are in
> a low tax bracket, in which case it could be 5%). State tax amount
> depends on state.

> As usual, this is not tax advice, and you should ensure that what you do
> is correct for your particular situation.
>
> --
> Mark Freeland
>

Thanks for everyone's help. I have tax records back to 86' but all records
of mutual fund transactions were lost in a house fire in 99' and Fidelity
claims they don't have records back to 86'. I'm not sure where to start.

Re: Mut Fd Sales

"gib" <~@~.com> wrote
> Thanks for everyone's help. I have tax records back to 86'
but all records
> of mutual fund transactions were lost in a house fire in
99' and Fidelity
> claims they don't have records back to 86'. I'm not sure
where to start.

Finance.yahoo.com provides a record of distributions back to
1986 for at least some Fidelity funds. Click on "Historical
Prices," then "dividends only," then set the dates. E.g. for
FMAGX, there was only one distribution in 1986, $2.85/share
in December. Let's call this number X for one of your funds,
call it Fund A. If you were very careful in your tax record
keeping, in theory you could divide Fund A's 1986
distributions (as recorded in your 1986 taxes, hopefully) by
X and compute (or closely approximate) the number of shares
you originally bought in 1986.

Presumably you have the number of shares you sold recently,
and it should be the same as the number for 1996, when you
stopped reinvesting. You should be able to work backwards to
compute.

Yahoo is not perfect, but ISTM it may be close enough for
your needs.

You might also ask this question at misc.taxes.moderated.

My understanding is if you make an honest effort to compute
the capital gain, and the numbers are reasonable, then the
IRS can't penalize you, because there is nothing easily
retrievable to challenge your numbers. The problem you
identify (not having complete records to compute a capital
gain/loss) is very common. That doesn't mean one should
shirk one's responsibility. It does mean one can usually
make a meaningful effort to fulfill it.

I would also call Fidelity again and double check that they
really haven't any records for you going back to 1986. That
they say they do not surprises me. It's not that long ago,
and estate executors, for one, run into this problem a lot.
Worst case, large companies like this may charge a fee but
tend to have the records. I could be wrong about Fidelity,
but I think it's worth one more try.

Re: Mut Fd Sales

gib wrote:
>

> Thanks for everyone's help. I have tax records back to 86' but all
> records of mutual fund transactions were lost in a house fire in 99'
> and Fidelity claims they don't have records back to 86'. I'm not sure
> where to start.

Since you know that you reinvested distributions until 1996,
reconstructing your cost basis is tedious, but not hard:

The number of shares you had in 1996 (after the last reinvestment) is
the same as the number you had when you sold (because you didn't buy or
sell any shares since then).

If one looks at one can often find prices and
distributions going back to 1986 (just far enough - lucky you).

Look at each distribution that you reinvested, in reverse chronological
order. For instance, using Fidelity Magellan (FMAGX) as an example, one
can pull up its historical prices through December 31, 1996. Suppose
that you owned 100 shares of Magellan when you finally sold the fund.

We see that there was a dividend of $0.60 on December 13th. The
dividend was reinvested at a price of $57.02 (the closing price on the
dividend date).

After the reinvestment, you had 100 shares. If x is the number of
shares prior to reinvestment, then:
x + x * (0.60/57.02) = 100 shares
x * (1 + 0.60/57.02) = 100
x = 100/ (1 + 0.60/57.02)

Prior to the dividend distribution, you had 97.271 shares (always round
to three decimal places).

That means that the you reinvested 97.271 * $0.60 from this
distribution. That is part of your cost basis.

Working backward again, you had 97.271 shares. Looking for the next
previous distribution, we see one for $13.35 on May 3, 1996. You
perform the same calculation to get the number of shares going backward,
and the dollar amount of the distribution:

Number of shares after distribution =
number of shares prior to distribution / (1 + dividend/share price)

Dollars distributed (and reinvested) =
number of shares prior to distribution * dividend per share

Keep working your way back to 1986. At that point, you'll have computed
the original number of shares you owned. You can make a good faith
estimate of the cost per share (if you don't know the purchase date) and
work with that. (Note again, this is not tax advice, and don't rely
upon it being correct.)

"In the event there really are no available records, the IRS requires
only that you make a 'good-faith' estimate of your investment, not exact
down-to-the-penny detail. Armed with partial information – the year and
amount of your first purchase, for example – it should not be hard to
meet the IRS standard."


Note that Yahoo is notoriously inaccurate in its historical records, so
you might want to go through old newspapers, or you could argue that
using Yahoo, while not exact down-to-the-penny, is a good faith effort.

You are right about Fidelity being notoriously bad about holding on to
old records. They only go back about a dozen years. Since I own
Fidelity shares with cost basis going back decades, I consider myself
very lucky that I was able to find the records (the shares had been
gifted to me). In contrast, another fund company not only had records
going back decades, but sent me photocopies of every statement, at no
charge. I am most appreciative, since I have yet to locate the original
copies for that fund.

Good luck.

--
Mark Freeland

Re: Mut Fd Sales

Oop Ack Brrak wrote:
>
> I would also call Fidelity again and double check that they
> really haven't any records for you going back to 1986.

I wouldn't waste my time. They say exactly that in writing.


> That they say they do not surprises me.

There seems to be much about Fidelity that surprises you.

--
Mark Freeland

Re: Mut Fd Sales

"Mark Freeland" <> wrote in message
news:
<snip>
> Note that Yahoo is notoriously inaccurate in its historical records, so
> you might want to go through old newspapers, or you could argue that
> using Yahoo, while not exact down-to-the-penny, is a good faith effort.
>
> You are right about Fidelity being notoriously bad about holding on to
> old records. They only go back about a dozen years. Since I own
> Fidelity shares with cost basis going back decades, I consider myself
> very lucky that I was able to find the records (the shares had been
> gifted to me). In contrast, another fund company not only had records
> going back decades, but sent me photocopies of every statement, at no
> charge. I am most appreciative, since I have yet to locate the original
> copies for that fund.
>
> Good luck.
>
> --
> Mark Freeland
>

Thanks so much for your detailed reply. Fidelity has also said that if I
make a "good faith" attempt at providing accurate figures that the Fed will
probably accept that.

Re: Mut Fd Sales

Oop Ack Brrak wrote:
>
> Finance.yahoo.com provides a record of distributions back to
> 1986 for at least some Fidelity funds. Click on "Historical
> Prices," then "dividends only," then set the dates. E.g. for
> FMAGX, there was only one distribution in 1986, $2.85/share
> in December.

Sigh. This is not correct. Between April 1, 1986 and March 31, 1987,
Magellan distributed $7.30. You can see this in the 1994 Magellan
annual report at:


(Search for "distribution" - the second one will bring you to the
per-share Financial Highlights table, that shows per-share, per-year
data, where the year goes from April 1 to March 31. The line to look at
is called "Total distributions".)

Since Yahoo reports no distributions between January and March of 1987,
we know that the total $7.30 was distributed between April 1, 1986 and
December 31, 1986. The $2.85 distribution falls $4.45 short of the
required total.

Yahoo's records for Magellan only go back through Sept. 2, 1986. So we
know that there must have been or more distribution between April 1,
1986 and Sept 1, 1986, totalling $4.45. Magellan typically (though not
always) distributes twice a year - something one can see from the table
that "Oop" suggested retrieving. Oops.


--
Mark Freeland

Re: Mut Fd Sales

"Mark Freeland" <> wrote
> "Oop Ack Brrak" <> wrote
> > If you have good records of your taxes and mutual funds;
> > have done your own taxes for years; and are handy with a
> > spreadsheet, this should not be too difficult. [...]
>
> > The "average cost basis" method is probably the easiest
to
> > use.
>
> The cost basis method doesn't matter, as the only figure
required in the
> OP's situation is total cost basis (for the total shares
sold). You appear
> to believe that cost basis for each share is needed for
taxes.

That's a stupid assumption by you.

Average cost basis is for situations described by the OP:
Sparse records; unable to identify what share was bought
when; etc.

> It isn't for
> the OP, who simply works with aggregate cost. Don't make
things harder than
> they need to be.

You're ridiculous. The links to which I sent the guy mention
the usual several methods of computing mutual fund capital
gains. I was drawing his attention to the fact that the
average cost method is easiest.

snip stuff that wanders off to la-la land

Re: Mut Fd Sales

"Mark Freeland" <> wrote
> Since you know that you reinvested distributions until
1996,
> reconstructing your cost basis is tedious, but not hard:
>
> The number of shares you had in 1996 (after the last
reinvestment) is
> the same as the number you had when you sold (because you
didn't buy or
> sell any shares since then).
>
> If one looks at one can often
find prices and
> distributions going back to 1986 (just far enough - lucky
you).

In your own feeble words: <Sigh> First you tell the guy
finance.yahoo records are "notoriously inaccurate," then you
send him to finance.yahoo, also implying that 1986's full
distributions are there.

You're not the first trust fund baby I've met with ego
problems. Makes sense: You haven't had to make your own way,
so you're insecure. <shrug>

Re: Mut Fd Sales

Oop Ack Brrak wrote:
>
> "Mark Freeland" <> wrote

> > The cost basis method doesn't matter, as the only figure
> > required in the OP's situation is total cost basis (for the total
> > shares sold). You appear
> > to believe that cost basis for each share is needed for taxes.
>
> That's a stupid assumption by you.
>
> Average cost basis is for situations described by the OP:
> Sparse records; unable to identify what share was bought
> when; etc.

And how does the OP compute average cost in that case? Adds up the
total cost and divide. No point in dividing, since the total cost is
what goes into the tax calculation.

Why does the OP care which share was bought when? The transactions are
reported together as "various", and the costs of shares are NEVER USED.

> > It isn't for
> > the OP, who simply works with aggregate cost. Don't make things
> > harder than they need to be.
>
> You're ridiculous. The links to which I sent the guy mention
> the usual several methods of computing mutual fund capital
> gains. I was drawing his attention to the fact that the
> average cost method is easiest.

Why, when one doesn't even need to identify or understand ANY cost
method? Only the total amount invested is needed here. You're merely
obfuscating.
>
> snip stuff that wanders off to la-la land

Right, that was the stuff where I agreed with you and provided
supporting documentation.

--
Mark Freeland

Re: Mut Fd Sales

Oop Ack Brrak wrote:
>
> In your own feeble words: <Sigh> First you tell the guy
> finance.yahoo records are "notoriously inaccurate," then you
> send him to finance.yahoo, also implying that 1986's full
> distributions are there.

Actually not - my original post said that Yahoo's records often (not
always) go back to 1986. Reading problem?

I also pointed out that despite inaccuracy (which is different from
omission), that would suffice for IRS purposes.

In the post to which you are responding, I wrote about your (not my)
recommendation to go to Yahoo, and your (not my) misreading of the
tables. You misread the tables - you said that according to the tables
there was only one distribution in 1986. That was wrong, because the
tables were silent (by omission) on this point.

Whether Yahoo numbers are correct or not does not detract from that
statement.

Like someone with a little more authority, you have problems
acknowledging errors.

--
Mark Freeland

Re: Mut Fd Sales

"Mark Freeland" <> wrote
> Oop Ack Brrak wrote:
> >
> > I would also call Fidelity again and double check that
they
> > really haven't any records for you going back to 1986.
>
> I wouldn't waste my time. They say exactly that in
writing.
>

_cost_basis.shtml#reasons

No, they don't say "exactly that." They say these are some
of the common reasons for not having records.

All I'm saying is it's worth checking one more time. Have a
cow, Mark Freeland. You usually do.

> > That they say they do not surprises me.
>
> There seems to be much about Fidelity that surprises you.

Given the number of times I have had to instruct you about
finances, mathematics, etc., and hence your beleaguered ego,
the comment above does not surprise me.

Re: Mut Fd Sales

"Mark Freeland" <> wrote
> Oop Ack Brrak wrote:
> >
> > In your own feeble words: <Sigh> First you tell the guy
> > finance.yahoo records are "notoriously inaccurate," then
you
> > send him to finance.yahoo, also implying that 1986's
full
> > distributions are there.
>
> Actually not - my original post said that Yahoo's records
often (not
> always) go back to 1986. Reading problem?

Implying, big boy.

> Like someone with a little more authority, you have
problems
> acknowledging errors.

Mark Freeland, the number of times I have pointed out errors
in your mathematics or financial reasoning is high. That you
don't subsequently respond is not to the detriment of my
opinion of you. That opinion is already quite low, let's
face it. A non-response often /is/ acknowledgment that what
was previously posted was erroneous. (I would say always,
instead of "often" but your desperate ego is so unbearable
much of the time that I usually have you on killfile. That's
not to say others should put you on killfile. It is to say
that you waste much time crying on Usenet about how your mom
and dad didn't give you enough attention yada. I find it
dull, along with many of your noxious substantive mistakes.)

What is most important is that the OP at this point has a
lot of good ideas on how to solve this tax problem. Though
I'm sure the vitriol between us is not appreciated by him or
any newbie.

Re: Mut Fd Sales

"Mark Freeland" <> wrote
> Oop Ack Brrak wrote:
> >
> > "Mark Freeland" <> wrote
>
> > > The cost basis method doesn't matter, as the only
figure
> > > required in the OP's situation is total cost basis
(for the total
> > > shares sold). You appear
> > > to believe that cost basis for each share is needed
for taxes.
> >
> > That's a stupid assumption by you.
> >
> > Average cost basis is for situations described by the
OP:
> > Sparse records; unable to identify what share was bought
> > when; etc.
>
> And how does the OP compute average cost in that case?

Forest, trees, maple, oak.

Re: Mut Fd Sales

"Satire" <> wrote in

> Mark Freeland, the number of times I have pointed out errors
> in your mathematics or financial reasoning is high. That you
> don't subsequently respond is not to the detriment of my
> opinion of you. That opinion is already quite low, let's
> face it. A non-response often /is/ acknowledgment that what
> was previously posted was erroneous.

In the overwhelming majority of cases it is you that fails to respond.

Re: Mut Fd Sales

Satire wrote:
>
> "Mark Freeland" <> wrote
> > Oop Ack Brrak wrote:
> > >
> > > "Mark Freeland" <> wrote
> >
> > > > The cost basis method doesn't matter, as the only
> > > > figure required in the OP's situation is total cost basis
> > > > (for the total shares sold). You appear to believe
> > > > that cost basis for each share is needed for taxes.
> > >
> > > That's a stupid assumption by you.
[...]
> > And how does the OP compute average cost in that case?
>
> Forest, trees, maple, oak.

Now you've got it! When you introduced average cost basis (saying that
it was the easiest), you got lost in the trees, when there wasn't even a
need to go into the forest.

Or perhaps I'm wrong, and you can show where average cost is easier than
ignoring cost per share altogether in this simple example:

Date Shares bought Share price Investment cost
1986 100 $10.00 $1000
1987 10 $11.00 $ 110 ($1.10/share dividend)
1988 15 $11.00 $ 165 ($1.50/share dividend)

Total cost = $1000 + $110 + $165 = $1275.

Suppose liquidating the position this year brought in $1500. Then the
long term gain would be $1500 - $1275 = $225. That's all that goes on
Schedule D.

No mention of cost method anywhere. No need to go wandering off into
that forest. You feign such concern for newbies. Educate them - show
them where I'm wrong, and how using average cost basis is easiest.

If you don't like my example, use another, so long as it meets the OP's
conditions (all purchases prior to 1997, multiple years of reinvested
dividends, etc.)

No vitriol here, just simple arithmetic. I've even rigged the numbers so
that you can compute average cost basis easily. I'll be glad to
acknowledge my error when you demonstrate it. Will you do likewise or
just fade away (as you wrote, often a non-response is an acknowledgement
of error)?

--
Mark Freeland