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Calculating the cost basis on a stock investment can be a pain in all the wrong places. I’m sure we can all remember the time when we had to scramble to look up what the term meant right before taxes were due, then figure out what timelines were to be factored into our stock portfolios and unearth information on the value at the time of purchase that would determine our stock basis. Well, these days, thanks to smart software and tracking solutions, you can figure out the cost basis on your stock pretty accurately. For instance, Money Plus by Microsoft is a great resource that many will vouch for. (See Matt Krantz’ review on USA Today to read why he likes Money Plus) However, ever since Microsoft decided to discontinue Money as a personal finance software (even though it did release the Sunset version), Quicken has quickly gained popularity among many users for its benefits in managing and arranging stock information. However, on stock cost basis calculations, many users say that Mint is rather basic and does not include all necessary information in its calculations, such as reinvested dividends, stock splits or mergers and bankruptcy. Quicken can be unstable on some operating systems reportedly on MS Vista, making it an unreliable software. That leaves us with the option of either having a brokerage firm manage our stocks (which may be unnecessary for those of us with small portfolios or inherited stock from an ancient past) or doing the calculations ourselves. Well, between the two, if you have the money to afford the services of a brokerage firm (calculate your offset costs in brokerage fees before signing up of course), firms have access to records and systems that can in fact unearth any amount of information you’ll need. Do your due diligence and maintain your own records, so that the brokerage firm doesn’t spring any surprises on to you. However, if you’re a DIY-er and you liked history a lot in school, cost basis calculations can send you on some fun chases around the internet, company websites and old archives to find out what the stocks were worth when they came to you. Hours of calculations may follow, as the shares need to be bundled according to the year they were received in, the number of shares bought at a time, fees and reinvested dividends on file and other nitty-gritties. And if you don’t like playing detective especially with old stock that has no trace or record that can make your calculations easier, some people suggest donating the stock to your favorite charity. The IRS allows contributions to charities to be deductible from taxable amounts every year as long as the donated amount of 30% of adjusted gross income. The deductible will be worth the fair market value of the stocks, and needs no cost basis calculation in order to give it away. NetBasis also is a new software that has become popular after the 2012 scramble that had large firms being required to report cost basis on the 1099-B. As stocks rise, fall, merge and split, you should know that these actions have significance in your portfolio. Make note of these changes while you can, they always come in handy while calculating cost basis for taxes.
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