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Do we use last known date and price for 2018 Mutual fund sale if purchased prior to 1999 and no records prior?
Sold father in laws mutual fund in 2018 including all reinvested dividends. Understand the cost basis and adjustments, but a sizeable portion was evidently purchased before 1999. We have paperwork and reinvested dividends from 1999/2018 but nothing prior due to lack of paperwork ( 1099's) and poor paper trail through 3 brokerages. Any idea how to determine original cost basis on the remaining portion purchased prior to 99. Should we use the last available price? Last time identified? Understandably the fudge factor since no one has a clue when this was purchased, perhaps even in the 70's.
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1. Were the shares of the fund held directly in your father-in-law's name and therefore recorded on the books of the fund and statements were issued directly by the fund,
or were the shares held in "streetname" by the brokerage firm and it would be the brokerage firm, not the fund, that would have issued statements to your father?
2. What is either the ticker or the name of the specific fund?
While mutual fund family companies are required by the SEC to hold history for seven years, many in fact have much older history available on archived digital images or even if older on microfiche.
Just to be clear on this from what you say, your father-in-law is still alive and you are acting for him under a Durable Power of Attorney or comparable authority.
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2) Yes under POA handling the affairs
3) Pricing can be obtained via charts that will go back ultimately to the funds inception. The problem is realistically "what date do I use to establish a price" now normally over that period of time there should be major gains but the financial planner (advisor) etc.. was incompetent. Also pricing can be verified via the mutual fund family, I Have spoken to them and need to go and speak to a backroom operation but the ultimate issue is the date .
4) I am trying to be proactive since with Fidelity and no basis, you can create your own 1099 and get that firmed up and downloaded by a drop dead date of 2/1 for 2/17 delivery. If I stay with the status quo than have to readjust the complete download in Turbo Tax, which isn't a problem but with years of reinvestments its a hassle.
5) I am unsure if the IRS is closed due to the shutdown , although when I do speak to them I always get 3 different opinions. I may just stick in a date get a 1099 , and submit as is in early April.
Unfortunately this isn't my first rodeo with the IRS , I have dealt with them in the past as a trader with mark to market accounting.
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" Secondly, in situations such as you have, the IRS is seeking a "best efforts" attempt to establish cost basis, not absolute nor actual.", you are very correct on that as a matter of fact if you recall it was only a few years ago that they started questioning your basis and asking where it derived.
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Luckily I can modify the 1099 to the costs at least with a 2/1 drop dead date so as to not reek havoc to the download with just proceeds and no costs.
Amazingly, with these funds in question, held for 20 + years, and the rule of 72 it turns out a return of slightly less than 3.5%. That is your investment advisor at work. We caught so many improprieties and even contacted FINRA, which as usual totally worthless.
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Glad that it was the case that the fund families did in fact provided you, or are going to provide you, historical data on the purchases and reinvested dividends. It was my expectation that any currently functioning fund family would likely be able to give you some data and possibly complete data.
The following instruction of the IRS may alleviate the burden of your reporting all these antique transactions for mutual fund shares. Note that you still have to segregate and report each named fund separately. The following is taken from IRS Pub. 550 https://www.irs.gov/pub/irs-pdf/p550.pdf and read carefully pages 45 (Cost Basis) through page 46, and see Table 4-1 on page 43.
Using Average basis.
You can use the average basis method to determine the basis of shares of stock if the shares are identical to each other, you acquired them at different prices and left them in an account with a custodian or agent, and either:
They are shares in a mutual fund (or other regulated investment company);
(not applicable)
(not applicable)
Shares are identical if they have the same CUSIP number (remainder not applicable)
If you are using the average basis method and received a Form 1099-B (or substitute statement) that shows an incorrect basis, enter "B" in column (f), enter the basis shown on Form 1099-B (or substitute statement) in column (e), and see How To Complete Form 8949, Columns (f) and (g), later. For details on making the election and figuring average basis, see section 1012, Pub. 550, and Regulations section 1.1012-1(e).
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2. You did not supply Fund Ticker or Fund Name - that said, again I suggest that you seek out the fund where the largest number of shares were held - see comment about actual history holding period by funds.
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