Advice on taxable account - yearly additions.

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GaryA505
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Advice on taxable account - yearly additions.

Post by GaryA505 »

I know this will probably be somewhat of a dumb question for some of you, but here goes. For a taxable account, if you make yearly additions to it and invest in mutual funds each time, does this create an accounting mess? How do you keep track of the cost basis when you are buying funds each time you add cash to the account? The cost basis will be needed for tax calculations when you sell, right?
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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BL
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Re: Advice on taxable account - yearly additions.

Post by BL »

Since a few years ago, the brokerages have been required to keep track of basis and report it to IRS when someone sells in a taxable account. You you can tell your brokerage that you choose Specific ID (or other types) as cost basis and then you can probably see on-line what the basis is for each lot you purchased.

Some people keep a spreadsheet of the numbers as well, but I don't. If you re-invest dividends and capital gains, that is another purchase lot.
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grabiner
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Re: Advice on taxable account - yearly additions.

Post by grabiner »

It creates an accounting requirement, but not a mess. I keep track of each of my taxable funds in a spreadsheet. My longest spreadsheet is for Emerging Markets Index, which I have held since 2002. I currently hold only eight lots, and three of those are old reinvested dividends from when the fund had a purchase fee and the reinvestment avoided this. I made a total of 29 purchases, but all the others have been sold for tax loss harvesting.
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Re: Advice on taxable account - yearly additions.

Post by lazylarry »

BL wrote:Since a few years ago, the brokerages have been required to keep track of basis and report it to IRS when someone sells in a taxable account. You you can tell your brokerage that you choose Specific ID (or other types) as cost basis and then you can probably see on-line what the basis is for each lot you purchased.

Some people keep a spreadsheet of the numbers as well, but I don't. If you re-invest dividends and capital gains, that is another purchase lot.
+1 . If you are not doing it a lot, then it is not a big deal accounting-wise IMHO.
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GaryA505
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Re: Advice on taxable account - yearly additions.

Post by GaryA505 »

Isn't the investment company required to keep some records on this now?
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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avenger
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Re: Advice on taxable account - yearly additions.

Post by avenger »

GaryA505 wrote:Isn't the investment company required to keep some records on this now?
Beginning in 2012, yes. I started my taxable investing career in 2012, so I don’t keep track of anything personally.
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sesq
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Re: Advice on taxable account - yearly additions.

Post by sesq »

I only recently exceeded my tax preference opportunities and started taxable. I keep a spreadsheet in part so that I can calculate my deferred taxes on appreciated (or depreciated) shares. I have an IF/Then formula that adjusts the rate based on whether the tax lot would be at short term or long term rates. It is uber nerdy but fun.
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Re: Advice on taxable account - yearly additions.

Post by livesoft »

GaryA505 wrote:I know this will probably be somewhat of a dumb question for some of you, but here goes. For a taxable account, if you make yearly additions to it and invest in mutual funds each time, does this create an accounting mess? How do you keep track of the cost basis when you are buying funds each time you add cash to the account? The cost basis will be needed for tax calculations when you sell, right?
There is no accounting mess whether one contributes zero, one, two, …, or many times a year, so I don't even worry or think about it.

I posted screen shots in another thread to show conclusively how trivial and worry-free it is.
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