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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Re: Dividend Reinvestment - A Tax Nightmare? Date: 7/6/2008 9:06 PM
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But have you considered just what exactly is the "average cost"?

500 shares @ 16.92
1.4563 @ 17.25
1.3423 @ 18.97
0.9452 @ 20.24
2.7458 @ 15.87


You've got $/share info here. That is the fastest way to confuse yourself with the tax issues around stock sales. Let's correct the presentation of your data first.

Shares        dollars
500.0000 8,460.00
1.4563 25.12
1.3423 25.46
0.9452 19.13
2.7458 43.58
-------- --------
506.4896 8,573.29


So now we can divide and get an average cost of 16.9269 per share.

At least with a mutual fund, they (presumably) can keep track of it for you.

I wouldn't make that assumption. Brokers and mutual fund sponsors tracking cost basis information for their clients is a fairly recent phenomenon. And it's mainly customer service driven. They don't have to do it, but they do to provide an additional service. There are also rumblings in Congress from time to time to start requiring brokers to track and report cost info to the IRS. That's only because technology is finally to a place where that is reasonably possible for most brokers to accomplish.

--Peter
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