dividends included in cost basis?

[WITAXLADY]

Besides Schwab - which I know they do - does any other Broker house include dividends in the cost basis upon a sale please?

[jklcpa]

If the dividends are being reinvested to purchase more shares (mutual funds or drip plans), then yes, the brokers are including this for the dividends paid that are considered "covered" securities.  For funds that were held prior to the brokers being required to track this, then there will be some transactions that are "not covered" securities, and some are showing the basis that isn't reported to IRS and some aren't.

 

Most of the broker statements that I've seen this year do have all of the information on them.  The ones that haven't had it were because the clients had switched brokers or advisors at some point in the past and the information was not available to be included.

[taxbrewster]

I have a similar situation were T/P sold a large fund and has a very large capital gains bill this year. It is a noncovered security - long term - via vanguard. It makes me wonder if the dividends have been included in the cost basis because the cap gain is over 75K. Would the process be going back and adding the dividends that the T/P paid tax on in previous years to adjust the cost basis?? Not really sure how to verfify the information and cost basis..Any help would be great. Thanks in advance - this board is such a great resource for us small practices out there.

[RitaB]

Vanguard is pretty good at getting it right. If they tell you the cost basis, I'd say it's correct. And most everybody I have did well on mutual funds this year. Your client can open on online account and find out a lot. But, yes, I have had to flip through old returns many a time and come up with basis by adding dividends. Never with Vanguard, but maybe it's an account that was transferred to them and they don't have the history or something, like Judy said.

Edited April 10, 2015 by RitaB

[taxbrewster]

Excellent. Thanks for the quick reply. Already have multi calls in to Vanguard and client so will wait and see what we find out.

[michaelmars]

go on line, most big companies have a way to do this, you enter original purchase and then the will calc all dividends reinvested and spits to give you a current basis.

[RitaB]

go on line, most big companies have a way to do this, you enter original purchase and then the will calc all dividends reinvested and spits to give you a current basis.

Oh, yeah, that's a good idea. Morningstar is great for that. Of course, if client did NOT reinvest dividends, that won't work.

Edited April 10, 2015 by RitaB

[michaelmars]

if he didn't reinvest the dividends then you already have the cost

[RitaB]

if he didn't reinvest the dividends then you already have the cost

That is correct if none of the dividends were reinvested, ever, and taxbrewster is not sure, and this is why accountants mumble a lot. Vanguard and client are your go to guys on his question.