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I have stock x with a broker, but also have stock X in the company's DRIP plan.

Can I sell my stock with the broker as it's own defacto lot, and use its own cost basis independent of the DRIP plan shares?

And another question...First, I purchsed some Eastman Kodak several years ago through an on-line broker.

Then I enrolled in EK's DRIP plan and bought periodically for a while, and then due to the impemenation of new fees, I sold all the shares in the DRIP. But becuase the entire process initially involved the transfer of shares to another plan, the sale of fractional shares, and costs that were paid with the sale of plan shares, the process involved selling some shares in one year, and selling the rest in another. I used the average cost basis method for these shares, not realizing that I WAS NOT supposed to do this. I have since recaluculated the taxes owed/saved, and estimated that, if anything, the error was in the governments favor by about $6. Do I need to file amended returns, or should I not worry about it. I would REALLY rather not worry about it, but want to do things the right way.

Ok, but now I have those other shares of EK that I bought many years ago still with an on-line broker. I want to sell those shares. Can I simply use the cost basis of those particular shares when I sell?

Sorry for the long question, I hope I was able to explain myself clearly.
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Re company X, yes, the shares owned through the broker are distinct from the shares owned via X's div reinvestment plan. You should keep cost basis numbers separate and distinct. Likewise, if you own blocks of the same stock thru two different brokers, you should treat them as separate and distinct. (Except for wash sale purposes...)

Re EK and DRIPs, you really have me confused here. About all I understand is that you sold some EK and used some kind of average basis, which as you have since learned, is incorrect. Could you be a little more specific on what you did and when? What transfer of shares are you talking about? I don't even understand how many brokers are involved.

I think you can rarely go wrong with filing amended returns - well, provided you now do everything correctly.

Lorenzo



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Re EK and DRIPs, you really have me confused here.

Ok. In 1999 I bought some kodak shares with a broker. Then, in 2000, I started a DRIP though Kodak. In late '00, Kodak terminated their DRIP, so I transfred over to Buyandhold.com. This process involved selling some fractional shares. In addition, there was a mistake where they only transfered PART of my holdings. So the easiest thing to so was simply SELL what was left in the previous account. Also, there was a selling fee, paid for by selling shares. So in 2000, there were 3 "sell" transactions to report. I reported these by using the "average cost basis method" as if EK were a mutual fund. I since have learned I cannot use average basis for stocks. After that, in 2001, I sold the remaining shares of EK that I had at buyandhold.com. Again I used the average cost basis method.

So now the only shares of EK I have left are the ones I bought in 1999 through my original broker.

1) If I were to file amended returns for 2000 and 2001 using an appropirate method for determining the cost basis of the sold shares I would be entitled to receive about $6. So my question is, can I simply forget about the $6, and claim "no harm, no foul", and move on?

2) I now want to sell the shares I bought with a broker in 1999. Will my error in #1 above prevent me from simply using the actual cost of those shares bought in 1999?
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1) If I were to file amended returns for 2000 and 2001 using an appropirate method for determining the cost basis of the sold shares I would be entitled to receive about $6. So my question is, can I simply forget about the $6, and claim "no harm, no foul", and move on?

I vote "yes."

2) I now want to sell the shares I bought with a broker in 1999. Will my error in #1 above prevent me from simply using the actual cost of those shares bought in 1999?

I recommend that you add up the total invested through all sources, subtract the basis amounts that you used on your 2001 and 2002 sales, and use balance for this final sale.

Phil
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Ok. It's still a little confusing. For example, you say you had three sales in 2000, but I only count two:

- the sale of fractional shares when you terminated the DRIP and xferred whole shares to buyandhold, and
- the liquidation of what remained of DRIP account after only part of it was transferred.

(It's not clear what you mean when you say "there was a selling fee, paid for by selling shares." Unless you actually made a third sale, say from the buyandhold account, then the fee - I assume charged by EK to liquidate the DRIP - is really just a basis adjustment...)

Well, never mind. Re your questions,

1) I think it's quite reasonable to just forget the amended returns, given the small dollar amount involved. The likelihood of your getting audited and having to substantiate your basis numbers is pretty much zero...

2) By all means, do the basis thing correctly with the 1999 shares, that is, use actual cost of shares (plus the usual commission/fee adjustments).

Lorenzo

P.S. This Carolina grad is always happy to sort out things for a confused Dookie.
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Thanks phil and lorenzo for your help!

P.S. This Carolina grad is always happy to sort out things for a confused Dookie.

Oh, taking pot shots now, are we? Save it for the basketball court! :)
I'm not to proud to admit that I occationally need help from a Ewe-NC grad. After all, I was trained as an engineer; I'm not any good with numbers.

(An aside about numbers...early in high school my dad was going over some math homework with me, and I got the answer mostly right except for missing a negative. I thought that the negative was no big mistake. My dad said "if you did that in real life, you'd have built a tunnel where you meant to build a bridge...THAT'S a big mistake.")
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