How to handle Cost Basis

Torrid Support 1

January 15, 2013 17:43

None

Where do I enter cost basis for stocks already owned when I start using the planner?

thanks - Libby

Libby,
We built this as an easy to use tool that anyone can understand... and because of that have not set it up to track buy/sell dates of securities, whether you held it for 2 years or not, and cost basis. If you have an investment with a really low cost basis you have a couple of options:

1). Estimate the investment amount as net of the taxes on the built-in gains. Then if it is growing by say 5% a year that future estimate is still good.

2). Another option is to enter a special expense for the tax on built-in gains. You would have to determine "when" to make that kick in though.

Torrid Support 1 January 17, 2013 20:19

Here is an example:

Say you have an investment worth $100,00 ($40,000 of which is LT capital gain), you should enter $90,000 as the initial investment (if I assume a capital gains rate of 20%)?

Actual Investment
$100,000 today's value
$60,000 cost basis
$40,000 taxable gain

$8,000 tax liability (assuming 20% capital gains rate)

Entered Investment: $92,000 to account for capital gains tax. Now when the investment grows at say 5%, at least there is an approximation of the built-in gain taxes owed.
ANother option is to estimate what the investment will be worth at a future year and enter a special expense for the LTCG tax on the unrealized gain. This is more work but slightly more accurate.

How to handle Cost Basis

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