Are the commissions paid to acquire the parent company included in the calculation of the cost basis of a spin off from said company? All the online sites I've looked at, and the spin off calculator at COSTBASIS.COM indicates so,and what I was told to do a long time ago.
I don't see the logic for omitting them in a spin off calc, but I'm being told this is incorrect.
The starting cost basis that you use for your spinoff calculations include any commissions paid to acquire the parent shares.
Ira Smilovitz
Certainly seemed logical to me. I don't know why I'm very insistently told no, but that's a whole other story.
Told no by whom? Or maybe there is something peculiar about this spinoff. Care to share the company name?
Ira Smilovitz
My financial advisor. Nothing special about the spinoff. It was Agilent spun off from HP, which I acquired in several small lots back in the 90s, and went thru a few splits. It was held in a different brokerage back then, but I think Agilent never had a cost basis listed in those records either, and it certainly transferred over without one. Was there a period where FIs didn't do those calculations automatically? They certainly do now.
Perhaps you should reconsider your choice of a financial advisor. HP sent out this letter which explains things clearly:
Your basis was your basis. If you had commission in your HP basis, you have 22% of that commission in your Agilent basis.
Perhaps you should independently decide if you like your financial advisor, and in any event tell him not to give tax advice. Choose a good financial advisor, and a good tax advisor. They usually are not the same person.
I agree with both John Levine and taxed and spent.
Ira Smilovitz
I have that document and understood the proration. It was my current broker, not an actual FP, who wanted to fix the missing basis for A in the account, since it didn't have one and several other securities have subsequently be spun off from the latter.
If she hadn't restructured my account from the disaster the previous broker had made of it, and done well for me for close to 10 years, I wouldn't tolerate the snarkiness she often delivers. She claims that our "debates" only happen in email, so for the moment I'm giving her the benefit of the doubt that I possibly phrased things imprecisely. We'll see how she replies to my response that every website I've researched both recently and in the past when I did my own calculations, plus the advise here, has agreed with me. We'll see; it's very unpleasant.
Perhaps I used the term "financial advisor" too loosely. She's my broker, but she does give me advice, in that she will suggest buys and sells. She refuses to give tax advice because her firm, rightly so, does not allow it. This recent calculation was not for a current tax situation but to prepare for possible future situations, since the spin off had NO cost basis in her account, and its cost basis was needed to calculate addtl spin offs .
The last think I want is for a brokerage house to try to keep track of my basis. Tell her to just leave them blank and you will put the proper basis on your tax forms if and when you ever sell.
If I don't have proper cost bases, I have to got thru additional calculations on my own to track performance. I have my own calculations in Quicken, but it's sometimes a PITA (Vodafone and Verizon, for example, was not a pure spin off and Quicken had nothing that directly would "work"). I would much rather have the brokerage doing it, provided they do it correctly. As far as I can tell, over the years it has been automated, they have been. I always cross check everything, but this time there were multiple lots of the parent company,and a fractional share received (and sold) and I wasn't 100% sure I was doing it correctly, so I ignored the unknown cost basis of Agilent for years. That's how my broker got involved.
Do you keep a separate spreadsheet of all your holdings and cost bases because you don't trust the brokerage figures? That's a hell of a lot of work if you have many holdings.
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