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Author: rlbusby Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120801  
Subject: Re: Easing tax-calculations for DRIP Date: 12/30/1998 8:52 AM
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You wrote: "Does it make sense to choose not to re-invest the dividends, and does that save oneself a lot of hassle during tax-time? As I see it, re-investing dividends is just like sending in some extra cash every month. If I am doing that anyway, then why not have the dividend sent to me and thus avoid the hassle of dealing with fractional shares, and purchases at odd times, etc"

Reply: You don't really save much effort by not re-investing dividends in a DRIP plan (and just investing additional amounts monthly). You end up with 12 monthly (4 quarterly) payments anyway. This is what I do. I keep the yearend statement from each DRIP. At the bottom I put the "cumulative" cost of all shares purchased. When I sell, I only sell "all" shares. I then divide up shares into long-term and short term gains and report them separately on the tax forms (as two entries). Note H&R Block allows one to put "various" in the date acquired block. I have the proper documentation to substantiate my purchases. I even put each purchase in a spread-sheet for my own purposes. I could choose to print out the spreadsheet and attach to the tax form, but I have some sympathy for the person that has to keypunch my hard-copy return in. If audited, I have complete records (annual statements and spreadsheets). What is the real difference in dealing with 16 entires per year (12 months + 4 dividends) and 12 entires (12 months).
With the low cost brokerages and higher costs of some DRIP plans, I've drifted away from DRIPs. It is easier to track one/two purchases per year than 12+ purchases.
Rod
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