The IRS requires people to pay taxes on profits made from the sale or redemption of stocks and mutual funds. Likewise, taxpayers can claim a deduction if the sale results in a loss. Be sure to know the purchase dates and costs of all such items as well as the sales price and date of the sale. The gain or loss on a stock sale is calculated by subtracting your cost basis from the proceeds of the sale. The dates of purchase and sale are important to determine whether the loss is short term or a long-term capital gain. Profits made on investments held for more than one year (long-term) are taxed at a lower rate.
If you do not have a record of what you paid for a stock, your broker might be able to provide that to you, or the company may be able to provide you the value of the stock on the purchase date. For those who participate in dividend reinvestment plans, remember to keep the year-end reports that tell the basis of the newly acquired shares. Always keep purchase records until an asset is sold. Please contact us if you have any questions.