I'm neither an accountant nor a tax guy. But, as my personal tax situation complexities have ebbed and flowed over the years, I've tried to keep up in order to do my own taxes. I can usually add two and two to get four. But sometimes I wonder if I'm adding the right two and two when it comes to doing federal income taxes.
I'm trying to look for what may be shortcut in figuring the cost basis of mutual fund shares sold in 2005. I've had a fund that has had various inflows and outflows over the past seven years. All shares were sold out last December.
Rather than going through the complicated calculations that was necessary for the intervening years' tax returns (when only a partial holding was sold), would the following return an accurate result in the unique case of selling all remaining holdings?
Assume everything is LTCG.
If we take the Total investments made in a mutual fund Add all distributions received (i.e. Automatic re-investments on which taxes were paid in the year received) Equaling Total Cost Basis for all shares ever purchased
From that, if we deduct Total tax basis reported for any sales sold in past years
The result Must equal Net Cost Basis for all shares remaining
Correct?
Thanks for any help. Be happy to return the favor and provide graphic design advice to anyone who asks.
That sounds reasonable to me, although I'm no accountant or tax expert. In fact, I think I'll try that myself next time my Fund doesn't furnish me with a cost basis. I don't worry too much about whether or not I make any mistakes in calculating my income tax. I do my own and I believe as long as you make an honest effort to get it right, what can they do to you? Last year they sent me a correction saying I owed them $9.00 because I left off a report of a little bank interest. So I just paid it. No big deal. Welcome to the pool.
The mutual fund cost basis form was received, but they do theirs based on an average cost basis. I didn't use that method on the prior year's tax return reporting prior sales of this fund. When the mutual fund does those forms, they have no information about how the individual has filed his previous returns in regards the fund.
But thanks for the other thought. In lieu of any taxman or other professional's response to my theoretical query, yours may be the best idea. The gov't can't force us to go pay fees to a third party so that we can see how much we gotta pay the gov't. I just hate the principle of that. We should all be able to prepare our own personal tax return. If they (mostly Congress, I guess) make things so complex that mistakes are made, then they'll have to accept that they were honestly made and deal with it!
