December 31, 2012
Q: If my stock splits 2-for-1, what happens to my cost basis? - R.Z., Houston A: Your basis splits 2-for-1 along with the stock. Imagine that you bought 100 shares of Meteorite Insurance (ticker: HEDSUP) for $60 each, paying a $10 commission. Your cost basis is $6,010 - or $60.10 per share. After the split, you have 200 shares and your basis is still $6,010, or $30.05 per share. Always add the purchase commission to your cost basis and subtract the sale commission from your proceeds - you'll save a few tax dollars that way. If you're paying a lot more than $10 per trade in commissions, you might want to find a less-expensive brokerage.
February 20, 1995 |
It's easy to make costly mistakes on income-tax returns when figuring capital gains and losses. Reason: People often don't keep good records showing how much they paid for investments. Income from stocks or mutual funds that is automatically reinvested to buy more shares often causes tax-filing headaches. Taxpayers may forget about dividends and capital-gains payments because they don't receive them in cash, said Jim Tutelman, tax partner at Price Waterhouse. Result: They could end up paying too much in taxes when figuring capital gains and losses from selling investments.
March 27, 2012
Tax season is going to become more complicated if you are an active trader/investor. This is the first year brokers must start reporting to you and the U.S. government the cost basis from your investments. "Cost basis" is what you paid for stock. It's used to calculate profit or loss when you sell. There are several methods for determining cost basis, and you can decide which one makes sense for you (ask your broker or accountant). In the past, taxpayers reported to the Internal Revenue Service any capital gains or losses from selling securities or mutual fund shares.
October 6, 1989 |
We stupidly bought our first home without getting a professional inspection. Shortly after we moved in, we discovered that the roof leaks and that the seller had put some carpet in the attic to absorb the water. We also found dangerous wiring that cost us almost $1,200 to replace. When we contacted the realty agent, she claimed no knowledge of the problem and reminded us we bought the house "as is" without an inspection. However, before the sale, the agent showed us a disclosure statement signed by the seller that did not list the roof or wiring defects.
March 1, 1991 |
We found the perfect home. It has a large first mortgage at only 8 percent fixed interest. The problem is, this loan has a due-on-sale clause. The seller says he will accept our down payment and will help finance the sale. How can we do this without the lender calling the first mortgage? It would be a shame to disturb that beautiful 8 percent fixed-rate first mortgage. However, there is no way of which I am aware whereby you can take title to the property without risking the lender's calling the mortgage due. But you can use a long-term, 30-year lease-option sale that can give you all the benefits of ownership.
July 11, 2013
D EAR HARRY : A few years ago, we moved to an apartment and rented out our home. We always reported the rent on our tax returns, and we deducted our expenses. My wife got tired of being a landlord because of the problems of neglect by tenants, as well as vacancies. As a result, we sold the property in 2011 for $42,000 more than we paid. We reported the gain on our 1040. Recently, we were notified by the IRS that they wanted to review our return for 2011. The examiner told us that we had to report the gain based on some lower cost because of depreciation.
November 22, 1991 |
I have been told I have terminal cancer and will probably die within the next six months. I own my house and several apartment buildings. My will specifies which of my four children shall receive each property. But I understand that probate costs will eat into my modest estate, so I am wondering if I should deed these properties to my children now before I die. What should I do? Deeding your properties to your children now could be a major mistake. The reason is they will take over your low cost basis.
September 28, 1990 |
My husband and I are selling our home. During our 14 years of ownership we have made many changes to the house. I am trying to figure out what our total cost basis is, including improvements. Are there any easy criteria for determining whether an expense is a repair or a capital improvement? The IRS says a capital improvement extends the useful life or enhances the market value of the property, whereas a repair maintains it in its present condition. But sometimes the difference is hard to distinguish.
August 18, 1989 |
My father is planning to divide his assets equally among his three children, including me. Since I am the only one with a family, he plans to give me his large house. Since he is in a convalescent hospital and no longer needs the house he, has offered to give us the deed to the house now. Is it better to inherit property or to receive it as a gift? If you inherit the house after your father dies, your cost basis will be the house's fair market value on the day of his death. However, if your father gives you the house before he dies, then you take over his presumably much lower basis in the house.
August 24, 1990 |
About four years ago I lost my job because my employer went broke. I fell about $3,500 behind on my credit-card payments and other bills. I stupidly filed for bankruptcy after seeing a lawyer's ads on television. However, he failed to warn me that bankruptcy stays on my credit report for 10 years. It has made it virtually impossible for me to obtain credit. Now I have enough for a 20 percent down payment on a home but can't get an 80 percent loan, even though I have an excellent job. I advise your readers to avoid bankruptcy.