Or at least, some kind of stock-related knowledge?
Here’s the thing. I bought Compaq ages ago, then kept it when the Internet bubble burst. I had 200 shares. When Compaq merged with HP, I wound up with 129 shares of HPQ. But I can’t figure out my current cost basis for my taxes. How do I take my original share price for Compaq ($21.50) and translate it to what it would be as an HPQ share? I need to know because I know I lost money. I think I once figured out that HPQ needed to climb to $31 in order for me to make my money back. I sold it at far less than that, and want to claim the loss.
Anyone know the math behind this? I was on the phone with my brother for a while, and thought I had it, but I didn’t. I just checked my figures on the tax form, and man, are they wrong.
Caution: I am not a tax pro and gave even trying to do my own taxes a couple of years ago. However,, your cost basis is:
200*21.50 + [commision when buying] + commision when selling]
If the form or tax software INSISTS on a per-share cost basis, divide by 129.
This sounds like a long-term loss, so it helps balance long term gains (if any) and a percentage of whatever remains (I forget how much) can be taken off short term gains and income.
I think I figured it out. I took the total cost of the original shares. I took the total cost that I sold the 129 shares for, then figured out a per-share basis on that. Then I multiplied the per-share times the deals I made to figure out the individual loss per deal.
If I did it right, it saved me a few hundred bucks on my taxes this year.
I have a call out to a friend who does taxes. Worst comes to worst, I’ll go to H&R Block and have them do it for me. But I think I finally got it.
I used the IRS PDFs. You can download them, and they’re writeable, so you get nice copies when you print them out. Think I’ll look into e-filing once I have my friend confirm that I did my taxes right. Because now I’m getting back enough to buy a new digital camera or an iPod. Hm. Which shall I get?
Per share prices are misleading, because of rounding errors. Most forms don’t ask for them. So your basis is simply the total amount you paid for the shares:
basis = 200 * 21.50 + sales commission.
If you need a per-share basis it is basis / 129.
Sales price is simple: what you sold them for – sales commission.
Profit should be computed as a whole.
Thanks, it’s now taken care of.