The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies

URL:  http://boards.fool.com/a-can-i-assume-a-zero-cost-basis-since-the-esop-30341265.aspx

Subject:  Re: Stock cost basis for ESOP & DRIP Date:  10/25/2012  6:04 PM
Author:  TMFPMarti Number:  116842 of 121599

(a) Can I assume a zero cost basis since the ESOP provided the original 59 shares at no cost to me?

(b) Or, in calculating the cost basis, must I account for stock purchases from dividends paid in the DRIP? The company’s dividends are qualified dividends. If yes, do subsequent stock splits in the DRIP account affect the calculation of the cost basis?


This is actually a lot easier than it appears on the surface since you're going to sell all your shares. You can show your date acquired as "various." Your basis is the total of:

1. Any amount relating to the purchases reported as wages on your W-2's; plus

2. Your reinvested dividends.

As was mentioned in the prior response, the IRS will not question a zero basis, but that artificially inflates your income. It also increases the amount of state income tax you'll pay (if your state has an income tax).

Phil
Rule Your Retirement Home Fool
Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us