Wednesday's tax tip Vol. 12 - Sale of Securities

If you own a stock or mutual fund, you need to keep track of the cost basis (what you paid for it) in order to compute an accurate capital gain.

My recommendation is to keep the statements that show any transaction related to that security.

For instance, if you purchase a stock like GE or P&G, where you purchase shares on a monthly basis keep the statements showing each of those purchases. If you reinvest the dividends for more shares, keep those statements. If you sell, keep those statements.

While it seems like a lot of paper (and it is), you'll find that you'll be able to calculate that gain in a much easier fashion. For some securities, the year end statement will report all transactions for the entire year which means you'll be able to shred all the other documents for that year.

Many times computing cost basis becomes a calculated guess and since it's a guess it may or may not work out in the best interest of the taxpayer.

If you are still not comfortable with the statements you need to keep please email me at gtvcpa@yahoo.com