Cost Basis Calculation

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Name=Random
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Joined: Sun May 21, 2017 2:58 pm

Cost Basis Calculation

Post by Name=Random »

I have a cost basis report for all my assets at Betermenent and i was trying to check the math against what i think the cost basis should be and it isn't working out.

The report gives me cost basis and shares purchased for all assets in my portfolio. I multiplied shares by corresponding cost basis and summed to get the total cost basis for everything in my portfolio.
Betterment never generated any capital gains for me and harvests losses.
Dividends are automatically reinvested. I've never made any withdrawals from the account.

I figured i could calculate what the total cost basis should be by doing the following:
cost basis = (total amount invested from checking account) + (dividends) - (management fees) - (harvested losses)

When i compare result of above calculation vs. the total i get based on the cost basis report the two numbers are a little off. The number based on the above formula is about $80 lower than the total cost basis based on Betterment's report. I realize that this is a small difference, but i'm wondering what am i doing wrong?
The only thing i can think of is that i may be double counting. The management fees were paid by selling my assets and those sales may have generated harvested losses. I'm not sure how i'm double counting, but maybe someone more clever and knowledgeable than me can figure it out.
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jimb_fromATL
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Location: Atlanta area & Piedmont Triad NC and Interstate 85 in between.

Re: Cost Basis Calculation

Post by jimb_fromATL »

Dividends reinvested become part of the cost basis. But if you took out cash to pay the taxes on dividends, it will be a little off. Could that be part of the problem?

jimb
Thesaints
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Re: Cost Basis Calculation

Post by Thesaints »

Concerning management fees, your cost basis is reduced by the cost basis of the shares sold to cover the fees. You may be hit (or enjoy) cg as well.
livesoft
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Re: Cost Basis Calculation

Post by livesoft »

You are conflating cost basis with what you contributed to the account. They are not the same thing.

Every single share purchased cost money to buy --- no matter whether the money came from outside the account from your contribution or inside the account from a dividend or inside the account from a sale of shares.

All you need to get the cost basis of each group of shares is to get the amount paid and the number of shares in the group. In broker-speak, a group of shares purchased in one transaction is a "lot."

I took a screen capture of several lots that I purchased in a Vanguard account and showed that in this thread:
viewtopic.php?p=2718843#p2718843

If you look at that screen capture, please see the 9/24/2015 lot that was purchased with a dividend paid of $119.51. The cost basis for that lot is $119.51 and since 5.066 shares were purchased, that is $23.59 per share for that lot which is also shown in one of the columns displayed. If I sold 2 shares from that lot, then the cost basis of the 2 shares would be 2 shares times $23.59 per share = $47.18.
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Thesaints
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Re: Cost Basis Calculation

Post by Thesaints »

The OP likely has his overall cost basis in mind. No need to consider individual shares cost.
livesoft
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Re: Cost Basis Calculation

Post by livesoft »

Thesaints wrote:The OP likely has his overall cost basis in mind. No need to consider individual shares cost.
Not a problem. The OP can add up what they paid for each and every lot by looking at the list of transactions.

But how do you explain this statement "I multiplied shares by corresponding cost basis a ...." which require knowing what individual shares cost.
Last edited by livesoft on Sat Jun 24, 2017 5:00 pm, edited 1 time in total.
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Thesaints
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Re: Cost Basis Calculation

Post by Thesaints »

Or simply use his total investment, with the corrections he lists, and save some time.

"I multiplied..." I think is how he calculated his total basis from betterment data.
kaneohe
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Re: Cost Basis Calculation

Post by kaneohe »

Name=Random wrote:.............................
I figured i could calculate what the total cost basis should be by doing the following:
cost basis = (total amount invested from checking account) + (dividends) - (management fees) - (harvested losses)

.....................................................
could this be part of the problem? Your basis when you harvest a loss should decrease by the basis of the harvested shares,
not by the amount of the loss..........the direction of error seems to be opposite than yours, however.
Topic Author
Name=Random
Posts: 46
Joined: Sun May 21, 2017 2:58 pm

Re: Cost Basis Calculation

Post by Name=Random »

@jimb_fromATL - i never took money out of the account.
Thesaints wrote:Concerning management fees, your cost basis is reduced by the cost basis of the shares sold to cover the fees. You may be hit (or enjoy) cg as well.
Can someone confirm for me that Thesaints is right? In my formula, i think I assumed management fees directly reduce the overall cost basis of my portfolio. If they reduce the overall cost basis only by the cost basis of the shares sold to pay the management fee then maybe that would explain it.
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