Message Font: Serif | Sans-Serif
No. of Recommendations: 0
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.
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.