Capital Gains question?

Question

Consider the following scenario:
A person has contributed to his company discounted share purchase program over years (post tax dollars). He moved 1000 accumulated shares to his brokerage account and now is planning to sell the shares. The brokerage account shows a cost basis of the share price at the time of the transfer.
What is used as the cost basis while calculating the capital gains tax? Please note that the 1000 shares were accumulated over many years with much volatility in the market (hence difficult to calculate cost basis).

Answer 1

Regardless of the volatility and the date of transfer to the broker your cost basis in the stock is the price you paid. You might be able to contact the company to determine the dates you purchased the shares (ie shares purchased through an employee stock purchase plan). If you know the approximate dates you acquired the stock, the broker can do research and find the historical prices on those dates.

If you are unable to determine the exact dates, you still need to approximate the cost basis.

Answer 2

The cost basis is what he ACTUALLY paid, not the value at the time he transferred them to his brokerage - that price has nothing to do with his basis.

The technical answer is if you can't come up with the basis for the stock sold, you use zero. He could also use the lowest value the stock had during the period of purchase, but if it was very volatile that probably wouldn't help much. Was he putting a constant percent of his salary into it? Maybe he could back into an estimate of the cost for his total shares that way, then figure out how much of that percentage-wise was attributable to the shares sold.

Assuming that there is substantial money involved here, I'd make a serious effort to come up with a good estimate and use that.

Answer 3

The cost basis is whatever the employee actually paid for each individual share of stock. You receive a statement for each share purchase so you already have the necessary records to calculate the gain when the shares are sold.

The cost basis shown on the brokerage account records is meaningless if it reflects the value at the time that you moved the shares into the brokerage account.

Answer 4

Your cost is what you paid from your "post tax dollars." So your accounting will be like this:
First lot of 5 shares purchased on (date) for (amount paid),
Second lot of (No of share) shares purchase on xxx for xxxx,
and so on.

Now suppose you sell 8 shares. You can put the cost as amount for 5 shares of "First lot" plus 3 shares of the "Second lot". It is your choice, you can use any of the lots to calculate the cost of the shares. But use it only once; make sure to keep proper accounting.

Answer 5

No, we ought to incourage investment to create jobs. whilst Ronald Reagan decreased the expenses greater money got here into the treasury. No economic equipment has ever been inspired via greater beneficial taxes. shrink taxes and greater jobs would be created and much less human beings will decide for government tips. Tax sales flow up and costs down.

Answer 6

If you kept your statements over the years you should be able to get the info there but if you have not, bad, bad idea, then it may be more time consuming to find. There are books available to your broker where he/she can look up the info they just charge you more for the research. :(