Can I rely on Vanguard to compute my cost basis?

[Anonymous]

I have a Vanguard individual mutual fund account that I've contributed too occasionally over 20 years or so. (Taxable, not IRA) As I get older, I'm starting to sell a bit a a time to help contribute to living expenses.

So, I sell, and at the end of the year Vanguard sends me s tax form with the sales amount and the cost basis, which is input for my tax return.

So, basically I am trusting Vanguard to calculate the appropriate cost basis. I'm not even sure what the rules are (use most recent purchase, or earliest purchase, for cost basis). Moreover, I don't know when I purchased what. I don't have more than a few years of records.

My question is, This works? I can count on Vanguard to calculate the appropriate cost basis? Not that I have much of a choice, since I don't have 20 years of records.

[Anonymous]

Yes.

The only reason not to would be that there are different ways of calculating costs basis if you buy multiple lots of the same mutual fund on different days (say you own 100 shares and 75 were bought at $10 and 15 were bought at $12)-- this also happens when you reinvest dividends from a mutual fund (which buy shares at the new price).

The easiest way to deal with this situation is to let the mutual fund company calculate "average cost basis" for all your shares, but some people like to track the cost basis for each individual share, so they can sell the ones with the highest cost basis first.

[Anonymous]

OP here. I didn't know that. Makes sense. I now recall "average cost basis" is what's used. Definitely want to make it easy so will continue as is. Thanks.

[Anonymous]

The IRS holds the taxpayer responsible for inaccurate cost basis reporting. Brokers and mutual fund companies are only held responsible for cost basis purchased after 2011, so if you purchased any of your shares prior to that, the cost basis they give you may not be accurate. There is an online tool called, Netbasis,(www.netbasis.com) that will automatically calculate an adjusted cost basis for all securities going back to 1925. It will adjust of all corporate actions and dividends. This is the best tool available to make sure that your capital gains reporting is accurate.

[Anonymous]

Anonymous wrote:The IRS holds the taxpayer responsible for inaccurate cost basis reporting. Brokers and mutual fund companies are only held responsible for cost basis purchased after 2011, so if you purchased any of your shares prior to that, the cost basis they give you may not be accurate. There is an online tool called, Netbasis,(www.netbasis.com) that will automatically calculate an adjusted cost basis for all securities going back to 1925. It will adjust of all corporate actions and dividends. This is the best tool available to make sure that your capital gains reporting is accurate.

This seems like spam-- I have never heard of Vanguard getting cost basis wrong and the chance the IRS would get involved seem minuscule.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The IRS holds the taxpayer responsible for inaccurate cost basis reporting. Brokers and mutual fund companies are only held responsible for cost basis purchased after 2011, so if you purchased any of your shares prior to that, the cost basis they give you may not be accurate. There is an online tool called, Netbasis,(www.netbasis.com) that will automatically calculate an adjusted cost basis for all securities going back to 1925. It will adjust of all corporate actions and dividends. This is the best tool available to make sure that your capital gains reporting is accurate.

This seems like spam-- I have never heard of Vanguard getting cost basis wrong and the chance the IRS would get involved seem minuscule.

and the chance that vanguard would get wrong and an individual would get it correct are astronomically small.

[Anonymous]

We sold a chunk of mutual funds last year and Vanguard was very helpful in calculating cost basis, even though we had purchased some of the lots before moving to Vanguard. I trust them implicitly.

Also, I think as long as you aren't always trying to claim a loss (i.e. you pay some cap gains taxes), the IRS is not likely to get involved.

[Anonymous]

OP here. Yes, it is just gains. Tnx.