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jyeh74
Level 2

Cost basis question

I sold some shares of German company in my brokerage firm.  The shares were dispersed from another account that my employer held.  Now that I sold the shares, I am being hit with 100% of the taxes unless I fill out the cost basis.  The issue is I bought discounted shares of stock every month, for a period of X years from my employer.  The employer sent my brokerage firm the cost basis but they won't take it because it is in Euros and not USD.  I cannot even translate it from Euro to USD because I don't know what the exchange rate was when it occurred on that exact date/time.  What do I do?

5 Replies
Corrlich44
Employee Tax & Finance Expert

Cost basis question

HI jyeh74,

 

Thank you for posting your question in our forum!

 

The first approach I would take is to assess the timeline of when shares were acquired each month or annually and document on a spreadsheet in chronological order from inception to sale date.

 

If the monthly amount of shares purchased is not known, but the annual amount is, I would then break up that known amount into equal monthly increments and then apply the Euro price from the last day of each month using a website similar to Oanda.com (https://www1.oanda.com/currency/converter/) and let your spreadsheet do its magic by mathematically computing the Euro-to-USD value for each month of shares purchased and add up the total.

 

This will be more than sufficient to reasonably justify a rational basis to document a cost basis you can substantiate upon any unknown audit.

 

I hope this is helpful to you jyeh74!

 

Regards,

 

Alan S.

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jyeh74
Level 2

Cost basis question

@Corrlich44  the year end statement does have each date and total number of shares purchased at Euro price.  It is a specific date once a month for several years.  Sometimes it is the 9th of the month and sometimes it’s the 11th of the month.  It all varies.  However, what do I do about shares given to me, that are transferred to me in bulk that had zero cost?

Corrlich44
Employee Tax & Finance Expert

Cost basis question

Hi jyeh74,

 

Thanks for responding my post....

 

I would do the exact same thing. If it is your understanding that the shares received in bulk were actually acquired throughout the year or oven a given number of years, then divide up those shares by the number of months you believe you acquired them over a sustained period and then on an average day of the month, whether it be the 9th, 11th or the last day of the month, go to that website I recommended and seek the Euro-to-USD value on that given day and value the security on that day as your cost basis.

 

As I said earlier, as long as you develop a reasonable basis to arrive at the presumed cost basis, the IRS will have no problem with any of this, should a review of your records be sought.

 

Just be consistent.

 

I hope this is helpful jyeh74!

 

Best of luck!

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jyeh74
Level 2

Cost basis question

I don't understand what you mean by average day of the month.

It will say for example, grant date = Dec 9, 2017.

Cost basis = 70 Euros

Valuation price = 90 Euros

Allocated = 14 shares

 

So I'm assuming I will look at your calculator for Dec 9, 2017 and do the conversion for 70 Euros (cost basis) to USD?  Not the 90 Euros (valuation price)

Corrlich44
Employee Tax & Finance Expert

Cost basis question

Hi Jyeh74,

 

As long as you have the appropriate information to state the day the shares were allocated to you or the day you paid for them or the day they were sold, you would use the following example to assist you further:

 

Acquisition Date: 12/09/2017

Shares Allocated: 14

Purchase Price: 70 Euros = $82.3004

Purchase Price Extended: $1152.21

Valuation Price: 90 Euros *

 

* Assuming the Valuation Price is amount used as the Fair Market Value on the day you exercise the shares. You would only use the Cost Basis when reporting to the IRS. The "Bargain Element" is the difference between the Grant Price and the FMV or possibly Valuation Price on the day you exercise the shares. You only report taxable income or loss when the shares are sold and not when they are exercised, if they are Incentive Stock Options.

 

Read further:

 

https://turbotax.intuit.com/tax-tips/investments-and-taxes/incentive-stock-options/L4azWgfwy

 

This is an example.

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