copied/pasted from ETrade: "How Dividends can affect cost basis Depending on the type of distribution, the effect on its cost basis can vary. Cash dividends do not lower the cost basis of an investment, either when you actually receive cash or when you use the proceeds to purchase new shares. Reinvested dividends are important to include in your cost basis because dividends are taxed in the year received, and if they are not included in cost basis, you may pay taxes on them twice. You can check out the Stock Plan Transactions Supplement for Cost Basis information. This can be found by going to etrade.com/taxcenter. If you have any questions regarding how to account for dividend payments from stock you acquired as part of your stock plan benefits when the cost basis in the 1099-DIV shows zero, please consult your tax advisor."
I'm not sure I fully understand this. Do I need to do anything if I don't sell any shares? And what exactly am I supposed to do when I finally do decide to sell shares one day?
Suppose I got 6k in dividends for the year 2020 set up with DRIP and taxed at the end of the year as roughly half qualified half ordinary. Suppose I sell $30k worth of shares purchased in 2020 with a cost basis of 15k. Am I supposed to figure out how much I paid in taxes on the 6k div payments from 2020 and then add that amount to the 15k cost basis for the shares I sold? Am I anywhere even remotely near correct on this?
Submitted October 09, 2022 at 11:58PM by TheBeatdigger https://ift.tt/UvPsXoQ
