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Author: tangofan Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121585  
Subject: Exchange rates and cost basis of foreign stocks Date: 3/2/2014 4:13 PM
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Hi,

Last year I have sold some stocks through my German brokerage in a transaction that was denominated in Euro currency.

For myself I have computed the USD cost basis and sales prices for each such sale using the exchange rates (for purchase date and sales date respectively) from the Federal Reserve website.

My German broker supplied me with 1099-B forms that showed slightly different sales prices, presumably because they used a different source for the currency rate. They did not report the cost basis. I don't know which source my broker used for the exchange rate, so I can't get a comparable exchange rate for the purchase date.

Here's a (fictitious) example of one transaction:
- I compute the sales price to $4000 and the cost basis to $3000 using the Federal Reserve exchange rates.
- My 1099-B shows a sales price of $3950 and no cost basis is reported

I'm assuming that I should treat all such transactions the same way for a given tax year (and perhaps even across multiple tax years).

I see three possible ways to report this:

1. Report the sales price as $3950 and the cost basis as $3000 for a cap gain of $950.

2. Report the sales price as $3950 and the cost basis as $2950 for a cap gain of $1000, which is what I calculated for myself.

3. If either of the above method is fine and it's okay to use different methods in different years, run the numbers across all stocks sales for method #1 and method #2 and pick the method that gives me the smallest gain / largest loss. (Sounds a bit fishy, but if it's permissible, I would do it).

How should I proceed on this?

Thanks so much for and advice,
Bernhard
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