Cost Basis of mutual fund shares redeemed

[Janitor Bob]

Client redeemed 85 shares of Van Kampen Pace Fund A in April 2007. He does not have a clue when he purchased these shares and he does not know what the cost was. Is it acceptable to use average value on these shares? Client is elderly and getting them to contact Van Kampen will be yucky

[BobinNJ]

Client redeemed 85 shares of Van Kampen Pace Fund A in April 2007. He does not have a clue when he purchased these shares and he does not know what the cost was. Is it acceptable to use average value on these shares? Client is elderly and getting them to contact Van Kampen will be yucky

Bob, what do you mean by average value? Are you talking about what the brokerage statement lists for this Van Kampan Pace Fund A? Or are you getting this "average" from the client out of where?

If the brokerage lists the number of shares sold at an average cost of X, and we know that dividends were probably reinvested, then use "various" as buy date. Your only other thing could be a long term/short term breakout for the dividends received in the last year before the sale.

Bob

[jklcpa]

Has the person been your client all along? Do you keep copies of client's orig docs?

If so, go back to the first year he or she reported divs. That should give you an idea of prch date. If you've saved copies of docs, use the 1st div date as purch date. Orig investment $$ is the hard part. If reinvesting and you have stuff in your files, just add all the yrs divs as add'l basis, with most recent 12 mos being short term. Of course, this won't work if they've had the fund longer than they've had you!

I know that I don't need to keep all this stuff forever, but sometimes I do when I know that client's are not organized. I end up digging through files in storage if client can't provide it.

VanKampen's site shows fund inception of 7/22/69. You can get historical prices & distributions from there. The site looks pretty good: http://www.vankampen.com/vksite/prices/history_mf.asp.

Maybe this helped in some small way. Good luck with it.

[Janitor Bob]

Has the person been your client all along? Do you keep copies of client's orig docs?

If so, go back to the first year he or she reported divs. That should give you an idea of prch date. If you've saved copies of docs, use the 1st div date as purch date. Orig investment $$ is the hard part. If reinvesting and you have stuff in your files, just add all the yrs divs as add'l basis, with most recent 12 mos being short term. Of course, this won't work if they've had the fund longer than they've had you!

I know that I don't need to keep all this stuff forever, but sometimes I do when I know that client's are not organized. I end up digging through files in storage if client can't provide it.

VanKampen's site shows fund inception of 7/22/69. You can get historical prices & distributions from there. The site looks pretty good: http://www.vankampen.com/vksite/prices/history_mf.asp.

Maybe this helped in some small way. Good luck with it.

The client has only been with me for two years so looking at old returns will not work. There may have been an initial fund purchase (client does not remember), but I know that over the years it has been through dividend reinvestments that happened without her involvement. I was once told that in cases like this it was acceptable to IRS for preparer to get an "average" value of the fund ($8.64 in this case) and use that (mutliplied by the number of shares sold) as the basis.

[michaelmars]

why aren't you doing the obvious first? have the client call the fund or broker and see if they have the basis, that usually works. or at least they have the date and amount of original purchase.

[Janitor Bob]

why aren't you doing the obvious first? have the client call the fund or broker and see if they have the basis, that usually works. or at least they have the date and amount of original purchase.

Because the client is an 81-year old man who can barely hear you in person when you shout...let alone talk to broker on the phone regarding this issue.

[michaelmars]

i just read that this issue is over 85 shares at $8.65/sh for a sale price under $800, is that right? @ 15% you are talking about $120 in tax. i can't see getting too involved over this, you probably spent more in prep fees trying to get an accurate cost basis already. even if you just take the div reinvested over the last 5-10 years you will knock the gain down to next to nothing.

[Janitor Bob]

i just read that this issue is over 85 shares at $8.65/sh for a sale price under $800, is that right? @ 15% you are talking about $120 in tax. i can't see getting too involved over this, you probably spent more in prep fees trying to get an accurate cost basis already. even if you just take the div reinvested over the last 5-10 years you will knock the gain down to next to nothing.

It is actually 85 shares sold at $11.77/share for gross proceeds of $1,000.00....But I see your point. I am just interested in doing it correctly because that is what I do. I can go back on last two years taxes (that I prepared) and get the amount of dividends reinvested....but not any further back.

As you mentioned, the end result is a small affect on client's taxes, so this is why I was simply going to use the average value of the fund since inception ($8.65) as the cost basis if acceptable.

...However...I still not sure I understand even the single-category method of averaging....Since I do not know how many shares he owned at the time of the redemption