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Here is a dumb question that arose from the Ford reorganization/value enhancement plan [VEP] this summer.

I have been reinvesting the dividends of my Ford shares at TDWaterhouse and so I had a non-whole number of shares before the VEP. Waterhouse decided that they needed to cancel the DRIP for Ford before the VEP and sold the fractional share I had. My question is what 8/10 of a share was this. Was this the first 8/10 of a share I bought using the FIFO policy. Or was it the last 8/10 of a share because it was this last fraction that caused the problem for Waterhouse, and so it seems to be a clearly indicated lot that was sold. Would it have made any difference if I had just started my Ford Drip and I had just one dividend purchase of this exact fractional share?

This question is really more academic than anything else since the difference between the basis of my first F purchase and my last F purchase is just a couple of dollars and so the tax consequences are negligible. I am just wondering if this forced sale of a fractional share makes any difference.

Thanks.

prime13
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No. of Recommendations: 1
<<I have been reinvesting the dividends of my Ford shares at TDWaterhouse and so I had a non-whole number of shares before the VEP. Waterhouse decided that they needed to cancel the DRIP for Ford before the VEP and sold the fractional share I had. My question is what 8/10 of a share was this. Was this the first 8/10 of a share I bought using the FIFO policy. Or was it the last 8/10 of a share because it was this last fraction that caused the problem for Waterhouse, and so it seems to be a clearly indicated lot that was sold.>>

Interesting question. My knee jerk reaction is that it's the first 8/10th share. But, as you correctly state, the first "teenies" have already been filled in, so logic would dictate that it's really the last 8/10th.

But...here is where logic goes out the window. If using the FIFO method (the default), you would be required to report the first 8/10th purchased...which would then revert back to the original purchase. So, unless the shares were identified and your broker confirmed as is required for the specific share method (read more about this in the Taxes FAQ area), I would vote for the first 8/10 shares that were originally purchased.

<<Would it have made any difference if I had just started my Ford Drip and I had just one dividend purchase of this exact fractional share? >>

Nope...because the FIFO method means that you have to sell the first shares purchased...no matter how many shares they represent...whole or partial.

Hope this helps...
TMF Taxes
Roy
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