Conference nyoss1::market_investing

re>                      <<< Note 1052.0 by SNAX::ERICKSON >>>
>                -< Cost Basis of Shares sold in a mutual fund >-
The two ways most often used are:

	* ACTUAL costs based on the NAV cost 
	* Average costs

Some Mutual Funds will provide to you the average cost of the shares you sell.  
If not, I have found the math to be a bit too complicated for most folks. If 
you cannot easily get the Average Costs, then the actual costs are not too 
difficult to arrive at assuming you kept your paperwork.  Just multiply the 
number of shares at each purchase date by the FMV (price per share) they were 
purchased at.  Do this for each and every discrete buy.  Then, add 'em all up 
and you have the net cost basis.

Dave

    
>	* ACTUAL costs based on the NAV cost 
>	* Average costs
    
    Wasn't there talk of the IRS eliminating the option of selling using actual
    prices?  Or was that only for individual shares held?
    
    If it is still allowed I have a BIG preference to using actual costs. 
    You can do a lot to help your tax situation.  You could sell shares at
    gains and losses that offset to minimize taxes.  Or if you don't have
    any at losses sell those with the smallest gains to minimize taxes. 
    
    Greg
    

    It is a Clinton proposal to only allow average costing.  This has not
    yet been approved by Congress.  Hopefully, people will testify about
    how difficult it will be for ordinary folks to do the arithmetic.
    
    Since the IRS had to cancel their big computer buy because they
    admitted they lost control of the project, I wonder how the IRS will
    discover and then handle returns in which the poor taxpayer goofed 
    on the arithmetic.

    The math in using actual cost basis accounting for the sale of mutual
    fund shares is not difficult, but you have to have kept your records. 
    For most funds that meant keeping the EOY statement for each year,
    showing the history for that year.  When computing your gains/losses on
    a sale, you then transpose the number to a sheet with a variety of
    headings across the top.  In my case I used the headings that Money
    Magazine discussed a few years back; they work well.  It means plugging
    the numbers in either by hand or on a spreadsheet that you can easily
    set up.  You can't get away without doing some degree of work here.  If
    I remember correctly, the intent was to take each line calculation, say
    a purchase, and quickly compute the gain or loss.  You the wrap around
    to the next line, always keeping a running tally in the last column. 
    When you are done, you have a + or - number to use.
    
    If you want the headings I can send them to you when I get back home. 
    On the road until this weekend, otherwise I would put them in now.
    
    Chuck

And from the For What It's Worth dept.....

I keep extensive data on purchases, distributions, sales, etc.  When I sell, I 
can tell you exactly what each share/fraction_of_share cost, what the CG/CL is, 
what the annualized ROI (taking into account the appropriate raito of 
subsequent distributions) of that original purchses is.  And I STILL have not 
been able to compute an Average Cost Basis and get the same numbers as
Fidelity.  Of course, since THEIR average Cost Basis figures show a smaller CG 
than using the actuals, I will continue to enjoy my ignorance.


Dave

       " I've been DCA into the same mutual fund for over 10 years and
         sold shares last year. So I essentially sold the first shares
         I bought back in the 80's. "
    
    If you have been buying regularly then do you have to account for the
    wash rules which say you can't purchase like investments within 30
    days +/- of a sale?

    How about taxes you pay each year?  In a non tax deferred account, you
    are taxed each year on the funds distributions.  Assuming you are
    DCAing and reinvesting your distributions, seems to me you have account
    for this or pay more tax than you owe.  Someone told me the average
    cost basis accounts for this?  Can someone explain this to me?

re>                      <<< Note 1052.6 by MKOTS3::MARTIN >>>
>                             -< Wash rules apply? >-
>    If you have been buying regularly then do you have to account for the
>    wash rules which say you can't purchase like investments within 30
>    days +/- of a sale?
Briefly (probably, too briefly) what the rule states is that you cannot claim a 
loss if you buy essentially the same stock/fund within a 30day before and 30 
day after a sale that otherwise is a loss.

If you have to ask, you should pick up one of the INCOME TAX guides for a 
better,mroe detailed explanation.

re>                   <<< Note 1052.7 by IVOSS1::VILLALOBO_GI >>>
>                     -< How About Taxes Previously Paid? >-
If you roll over your distributions, you claim a "distribution" in that year; 
dividend or CG, whatever applies.  That rolled over distribution is treated as 
a new buy at the cost basis of the distribution.   Any gain you realize when re
-selling those shares will be Capital Gains.

Dave

Gang,

Instead of responding to various tax questions, I highly recommend that you
"browse" on over to the Vanguard web page.  They have a very, very good section
on taxes and funds. 

Look for

	http://www.vanguard.com/new/investor/II19970114Z.html

Dave

    RE:-1
    I spent some time last night on the Vanguard website.  And to confirm
    the previous reply, the tax information was absolutely excellent.