Liquidating dividend cost method

The simpler “average cost, single category” method allows you to figure the cost of the entire holding, divide by the number of shares owned and come to an average cost before making your first sale.You then subtract this average cost from the sales proceeds to determine your gain or loss.This cost is pretty easy to calculate— you don’t reinvest dividends or dollar-cost average when you invest.

There’s one major downside to using this method: If you choose it for your first sale, you must continue to use that method for every subsequent sale until you completely liquidate the holding.

Those, of course, are likely to have the lowest cost and the highest tax obligation, assuming a rising market.

The other option with individual shares is called “specific identification.” Specific identification is the method likely to give you the most flexibility and potentially the best tax result. 10 years ago for a share, or ,000; you also paid a brokerage commission for a total cost of ,050, or .10 a share.

If you’re placing the order by phone, you can tell your broker which shares you’re selling (for example, “the shares I bought on July 5, 2012, for each”).

If you’re online, the approach will vary by brokerage.

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