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Subject:  Re: Dividend Reinvestment - A Tax Nightmare? Date:  7/6/2008  5:47 PM
Author:  Opv1419 Number:  101270 of 124763

Could someone please explain why DRiPs are such a tax nightmare? Can't I just keep a "cost-average" and then use that number to determine my gain or loss when I buy or sell?


Some consider it a nighmare because each DRIP event has to be tracked individually for tax reporting purposes, as each dividend reinvestment is an individual stock purchase. Thus, each purchase has it's own per-share purchase price that has to be tracked for purposes of calculating capital gains on each individual purchase.

At least that is the way I understand it. Those more Foolish than I might have other, more enlightening thoughts.

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