You are responsible for tracking pre-2011 stock purchases

May 10, 2011

Discover nuances of purchasing stock pre-2011.

Q: I understand that starting January 1, brokerage houses were required to track what I paid for stock and provide this information to me upon any sale. What happens if I purchased stock before 2011?

A: For purchases made before January 1, each taxpayer is responsible for tracking his or her adjusted cost basis for each individual stock. When the stock is sold, you subtract the adjusted cost basis from the sale proceeds to determine whether a gain or loss occurred.

Although this process may seem straightforward, it can get complicated when you consider reinvested dividends, stock splits, reverse splits, shares bought and sold at different times, etc. For example, if you purchased some shares of a stock in 2007 and more shares in 2009, and sold a portion of your holdings in 2011, which shares of the stock have you sold? What happens if you obtained the stock through a gift or inheritance?

Answer provided by Medical Economics editorial consultant David J. Schiller, Schiller Law Associates, Norristown, Pennsylvania.Send your money management questions to medec@advanstar.com
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