I know the basis of stock includes the cost of the original purchase, but does it also include the value of stock acquired through a dividend reinvestment plan?
Unless you sell all of your shares at one time, your total basis, which includes both your original purchase and any purchases through a dividend reinvestment, is not the figure used to report the sale of shares. If you sell less than all of your shares at one time, you need to have kept adequate documentation of all your purchases, including those that were through the dividend reinvestment plan in order to establish the basis of the shares sold. You may not use an average cost basis. Only mutual fund shares may have an average cost basis. When reporting the sale of shares of stocks, the basis for the calculation of gain or loss is the actual cost (plus adjustments, such as sales commissions) of those shares. If you cannot specifically identify which of your shares were sold, you must use the first-in first-out rule. For more information, refer to Publication 550, Investment Income and Expenses, and Publication 551, Basis of Assets.
Related Questions
- I know the basis of stock includes the cost of the original purchase, but does it also include the value of stock acquired through a dividend reinvestment plan?
- How do I report a sale of stock when I don know the cost basis or purchase price of the original shares?
- How do I determine the cost basis of stock bought through an employee stock purchase plan (ESPP)?
