March 2008
A software cure for cost-basis anxiety?
Finding the cost basis of a long-held stock or mutual fund is a bit like trying to remember all the phone conversations you
have had with a friend in the past 25 years, including the date and cost of each call.
When your brokerage or investment company doesn't provide cost-basis information, you either have to calculate it yourself or pay your tax preparer big bucks to do it for you. The task of identifying how much you've earned, particularly when you've used a dividend-reinvestment plan, is daunting. The hassle is compounded if you haven't kept all your records or if the holding has changed names a few times, as is the case with some venerable names like AT&T.
A tool that's included in TurboTax's Premier ($75) and Home & Business ($90) software claims to easily track and calculate cost basis. We tested it last year and found it helpful. The feature uses an Internet connection that wasn't functional at press time, but we have no reason to think it won't work as well this year.
Here's how it works: When you get to the section of TurboTax involving the cost basis of investments, select “I want TurboTax to help me figure it out.” You'll be walked through a series of questions, including the date of the purchase. If you can't recall, use your best guesstimate. TurboTax will then list all the company names with which your stock or fund was associated since you got it.
For our test, we used Vodafone stock, which is a great-great-grandchild of AT&T. TurboTax led us to a list of Vodafone progenitors, including AT&T. Clicking on “AT&T” started an instant calculation of the comparable AT&T purchase price for the date in question, as well as the comparable number of shares purchased. Another click led to the cost bases for both long- and short-term capital gains treatment. One more click provided a dividend-reinvestment schedule. The whole process took less than 10 minutes. We also successfully tested the software with a hypothetical mutual-fund sale.
For comparison, we tried two online services. BigCharts was free, but it couldn't identify AT&T on the Vodafone family tree. Xcitax costs a minimum of $50 to use. It's designed for tax professionals, and we couldn't follow its instructions.
Some companies have made it easier for shareholders to determine the cost basis of stock with free interactive services on their Web sites. Typically, you can find the services in the Investor Relations section of the site.
When your brokerage or investment company doesn't provide cost-basis information, you either have to calculate it yourself or pay your tax preparer big bucks to do it for you. The task of identifying how much you've earned, particularly when you've used a dividend-reinvestment plan, is daunting. The hassle is compounded if you haven't kept all your records or if the holding has changed names a few times, as is the case with some venerable names like AT&T.
A tool that's included in TurboTax's Premier ($75) and Home & Business ($90) software claims to easily track and calculate cost basis. We tested it last year and found it helpful. The feature uses an Internet connection that wasn't functional at press time, but we have no reason to think it won't work as well this year.
Here's how it works: When you get to the section of TurboTax involving the cost basis of investments, select “I want TurboTax to help me figure it out.” You'll be walked through a series of questions, including the date of the purchase. If you can't recall, use your best guesstimate. TurboTax will then list all the company names with which your stock or fund was associated since you got it.
For our test, we used Vodafone stock, which is a great-great-grandchild of AT&T. TurboTax led us to a list of Vodafone progenitors, including AT&T. Clicking on “AT&T” started an instant calculation of the comparable AT&T purchase price for the date in question, as well as the comparable number of shares purchased. Another click led to the cost bases for both long- and short-term capital gains treatment. One more click provided a dividend-reinvestment schedule. The whole process took less than 10 minutes. We also successfully tested the software with a hypothetical mutual-fund sale.
For comparison, we tried two online services. BigCharts was free, but it couldn't identify AT&T on the Vodafone family tree. Xcitax costs a minimum of $50 to use. It's designed for tax professionals, and we couldn't follow its instructions.
Some companies have made it easier for shareholders to determine the cost basis of stock with free interactive services on their Web sites. Typically, you can find the services in the Investor Relations section of the site.
This article was also published in Consumer Reports Money Adviser.
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