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Author: jamiegumm One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76387  
Subject: stupid question about figuring basis Date: 2/26/2009 10:53 PM
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I m not exactly numerate, so forgive any naivete in this neophyte's queries and this may not even be the right forum but you all have been very helpful as regards our IRA, so here goes: Perhaps some back story might help. We own a simple ETF from a discount brokerage, with the election to have dividends reinvested, dollar cost averaging into it all along. I am wondering mathematically how to figure the cost basis if we plan on selling incrementally now and again? Please tell me that the reinvested "additionally purchased shares" via those reinv. divs don't count insofar as figuring new "trade dates" for those particular fractions.

Just curious, really, how to figure the new cost basis including the reinvested dividends. And am I correct the expense ratio on ETFs just comes out of the dividends automatically so no additional math on our part is required?

But for a simple example, if at the end of a year's trading, we had a vested amount of roughly $832.00 in an ETF worth, at the time, say $40/share, with $32 of it from reinvested dividends equaling like 20.8 shares (the .8 part from the divs). And we wanted to sell about the first two shares purchased (FIFO right?), how to figure the basis? I know you have to include the commissions, but how to include the dividends to raise one's cost basis.

Perhaps someone smart could come up with a simpler, cohesive example, but I m trying.

And how to know if your investment is IRS-wise considered a DRIP and are there more complications of which to be aware on those?
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