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I keep reading that DRiPs are a tax nightmare, however, I really want to enroll my stocks in DRiPs to save on transaction costs.

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?

Hi Rick. Not sure if this is what you want to hear or not but when I was involved in dividend reinvestments over a long period and sold one of the issues I finally said to heck with it and claimed my cost basis as zero and paid full taxes on the sale price minus the basis. It was a lot easier than figuring out all those little fractional shares purchased and dividends paid and repurchases over the quarters/years.

I guess if you were diligent and kept on top of it you could post all this stuff to a spreadsheet. It's pretty nasty.


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