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My understanding is that, in figuring out the cost basis for mutual funds, there are four different methods and if you use one of those methods for a partial redemption, you have to continue using that method for that fund.

We sold some fractional shares this year. If it seems like it's not worth digging through all the paperwork and we choose to say the cost was zero, am I obligated to use a zero cost basis for the rest of the investment?

TIA ~~ Alison
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We sold some fractional shares this year. If it seems like it's not worth digging through all the paperwork and we choose to say the cost was zero, am I obligated to use a zero cost basis for the rest of the investment?

TIA ~~ Alison



When I sold a portion of two mutual funds, in both cases it was by round dollar amount, and the mutual fund co. provided me the cost basis. I have to think that this is the norm rather than the exception.


Seems odd to sell fractional shares of Mutual funds.
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Seems odd to sell fractional shares of Mutual funds.

Sorry, it was stocks, not mutual funds, that had fractional shares sold.

and the mutual fund co. provided me the cost basis.

I've had some mutual funds provide the cost basis, some that didn't, and some that chose the method, which wasn't always the right one for my situation.

Thanks for the reply!

~~ Alison
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Stocks and mutual funds play by different rules when determining cost basis. So you need to make sure which one you're dealing with.

Assuming your second comment is correct and this is a stock, you must use FIFO unless you choose to use specific identification at the time the stock was sold. Since it appears you didn't do a specific identification, you're stuck with FIFO.

And no, using a zero cost does not lock you in to using a zero cost for the rest of the shares.

--Peter
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Thanks very much, Peter.

Stocks and mutual funds play by different rules when determining cost basis. So you need to make sure which one you're dealing with.

Assuming your second comment is correct and this is a stock


Yup, and my mind was going faster than my fingers with my first post <g>.

And no, using a zero cost does not lock you in to using a zero cost for the rest of the shares.

That's what I thought, and I'm glad you've confirmed it.

The dollar amounts I've got are $6.48, $.05, $0.59, $12.71, $5.69, $1.57, $15.54, $5.23 and two for $0.01 -- totalling under $50, which doesn't seem to be worth the effort of digging through all the documentation (let alone looking for the documentation, packrat that I am) for those fractional shares.

There are a couple of others of higher dollar amounts which warrant some effort, but not those other ones I've listed.

Thanks again!

~~ Alison
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Hi Peter
<snip>
(if)this is a stock, you must use FIFO unless you choose to use specific identification at the time the stock was sold.

I have always been curious about this because I buy/sell all my stocks online and do not have direct contact with a broker (as I am sure many other Fools do their own online trading too) so how can I document which purchase block of stock I am selling? When I sell a stock I know what block I am selling of course and accordingly show that on Sch D.
I hope you don't tell me I have to contact my broker and have him/her execute the trade and notate which purchase block I am selling while I incur a much higher commission? Please say it isn't so.

TG
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I hope you don't tell me I have to contact my broker

Sorry, but that's exactly what you need to do. You must have written confirmation from your broker indicating what block of stock you have sold in order to have a proper specific identification of the stock sold.

You do not necessarily need to execute the trade by phone. You just need to determine how to indicate what block of stock you are selling so that your broker will indicate that on your trade confirmation. How to do that varies by broker. Some discount brokers have that facility built in to their online trading system. Some require you to incur a higher commission and trade by phone.

If this is an important part of your trading strategy, you might need to switch to a more user-friendly broker.

--Peter
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Some discount brokers have that facility built in to their online trading system.

Thank you Peter for the info.

Can any Fools here recommend an inexpensive (less than $10/trade) "user friendly online broker" where one can designate what block of stock they are selling through their online trading system?

Thanks

TG
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Can any Fools here recommend an inexpensive (less than $10/trade) "user friendly online broker" where one can designate what block of stock they are selling through their online trading system?

Here's a link to the discount brokers discussion board. They could probably help with that question.

http://boards.fool.com/Messages.asp?bid=100146

--Peter
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Can any Fools here recommend an inexpensive (less than $10/trade) "user friendly online broker" where one can designate what block of stock they are selling through their online trading system?

Thanks

TG


Before you charge off to find this new brokerage firm, you might ask yourself
- How often am I actually going to use this feature?
- The additional tracking burden I am adding to my plate, (especially if you have DRIP shares or sell a partial position)?



Hohum
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Can any Fools here recommend an inexpensive (less than $10/trade) "user friendly online broker" where one can designate what block of stock they are selling through their online trading system?
========================================
Fidelity is very good about this.
When you do a sale, and have multiple blocks of stock, it will prompt you to choose which lot(s) the sold shares come from.

The commissions there vary, depending on:
*The volume of trading you, and
*The amount of assets you have with them (multiple accounts can be combined, including mutual funds where you don't trade.)

$10/trade is about what I pay.

Bill
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Hi

Thank you everyone for helping me figure how best to do this. No, it's been relatively rare for me to have multiple buys in one stock, but I do have a couple and may have more in the future due to a change in my investment strategy. But first I have to check out my current online broker .... heck, they may already have this feature but I wasn't aware of it since I have never had the need to use it.
Thanks again everyone.

TG:)
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You just need to determine how to indicate what block of stock you are selling so that your broker will indicate that on your trade confirmation

Yup, that's what my online broker (TD Ameritrade) told me. He said to call them right after I executed the online trade and notify them of what purchase the sell order related to, so they can update the confirmation with the appropriate information. Piece of cake.
Thanks again.

TG
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