cost basis in retirement account

Discussion in 'Microsoft Money' started by bobmoneyquestion, Apr 28, 2006.

  1. When calculating my cost basis for a mutual fund in a roth-ira, money
    includes any reinvested dividends and capital gains to the cost basis thus
    when generating returns that are not right.

    because roth accounts are pretaxed any dividends or capital gains are not
    taxed and should not be added to the cost basis.

    i've gone into the account settings and checked that this account is a
    retirement account and a roth-ira.

    any suggestions on how to fix this so i can determine what my actual returns
    are?
    --
    bob
     
    bobmoneyquestion, Apr 28, 2006
    #1
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  2. In microsoft.public.money, bobmoneyquestion wrote:

    >When calculating my cost basis for a mutual fund in a roth-ira, money
    >includes any reinvested dividends and capital gains to the cost basis thus
    >when generating returns that are not right.
    >
    >because roth accounts are pretaxed any dividends or capital gains are not
    >taxed and should not be added to the cost basis.


    That is a non-sequitur.

    >
    >i've gone into the account settings and checked that this account is a
    >retirement account and a roth-ira.
    >
    >any suggestions on how to fix this so i can determine what my actual returns
    >are?


    I could try to explain why shares bought with dividends are
    logically part of the basis. From a tax point of view, can we at
    least agree that the "basis" of the shares is moot?
     
    Cal Learner-- MVP, Apr 29, 2006
    #2
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  3. bobmoneyquestion

    arthur Guest

    How's this:

    I have $1000 in my left pocket.
    I receive $1000 dividend and put it in the right pocket.
    I buy $1000 worth of addition (new) shares.

    Does it make any difference, and to whom, from which pocket I paid for
    the new shares?

    arthur
    ==

    On Fri, 28 Apr 2006 18:14:46 -0500, Cal Learner-- MVP
    <> wrote:
    >
    >I could try to explain why shares bought with dividends are
    >logically part of the basis. From a tax point of view, can we at
    >least agree that the "basis" of the shares is moot?
     
    arthur, Apr 29, 2006
    #3
  4. bobmoneyquestion

    ameridan Guest

    I think you are confusing "cost basis" with "contributions". Although they
    start out as being the same amount, as you see, they diverge from each other.
    The same thing happened to me and I resolved it by keeping a tally of the
    contributions in the account details comments section.

    "bobmoneyquestion" wrote:

    > When calculating my cost basis for a mutual fund in a roth-ira, money
    > includes any reinvested dividends and capital gains to the cost basis thus
    > when generating returns that are not right.
    >
    > because roth accounts are pretaxed any dividends or capital gains are not
    > taxed and should not be added to the cost basis.
    >
    > i've gone into the account settings and checked that this account is a
    > retirement account and a roth-ira.
    >
    > any suggestions on how to fix this so i can determine what my actual returns
    > are?
    > --
    > bob
     
    ameridan, Apr 29, 2006
    #4
  5. bobmoneyquestion

    Chris Cowles Guest

    "ameridan" <> wrote in message
    news:...
    > The same thing happened to me and I resolved it by keeping a tally of
    > the
    > contributions in the account details comments section.


    Would it not be effective to simply report on a specific payee in the
    contributions account?
     
    Chris Cowles, Apr 29, 2006
    #5
  6. bobmoneyquestion

    ameridan Guest

    Now that you mention it, IRA REGULAR CONTRIB would do it, but in 20 more
    years I might finally have to archive my data file and I'd have to peice
    together the information. It's nice to be able to look in the details and
    see that IF I need some mula quick, I can pull $24K out of my Roth without
    penalty.

    "Chris Cowles" wrote:

    > "ameridan" <> wrote in message
    > news:...
    > > The same thing happened to me and I resolved it by keeping a tally of
    > > the
    > > contributions in the account details comments section.

    >
    > Would it not be effective to simply report on a specific payee in the
    > contributions account?
    >
    >
    >
     
    ameridan, Apr 29, 2006
    #6
  7. bobmoneyquestion

    Dick Watson Guest

    The problem with the details note is that you have to maintain it.

    BTW, it's an Investment. Unless they redesign archiving, you could archive
    it 1,000 years from now and the Investment Buy would still be there.

    "ameridan" <> wrote in message
    news:...
    > Now that you mention it, IRA REGULAR CONTRIB would do it, but in 20 more
    > years I might finally have to archive my data file and I'd have to peice
    > together the information. It's nice to be able to look in the details
    > and
    > see that IF I need some mula quick, I can pull $24K out of my Roth without
    > penalty.
     
    Dick Watson, Apr 29, 2006
    #7
  8. bobmoneyquestion

    Chris Cowles Guest

    "Dick Watson" <> wrote in
    message news:...
    > The problem with the details note is that you have to maintain it.
    >
    > BTW, it's an Investment. Unless they redesign archiving, you could
    > archive it 1,000 years from now and the Investment Buy would still be
    > there.


    Contributions to the cash account get archived. I think those transactions
    are the focus of the report.
    --
    Chris Cowles
    Gainesville, FL
     
    Chris Cowles, Apr 29, 2006
    #8
  9. Cal learner...i didn't realize that this was a website where MVP's would
    ridicule you for being confused about a problem. If this is beneath your
    scope of expertise maybe someone else can help me.

    I'll try to explain my problem again:

    let's say i invest 1000 in mutual fund xyz(in a roth-ira) in 2005 and it
    pays me 100 in dividends which are reinvested.

    in a regular account my cost basis would jump to 1100 because of the
    reinvested dividends and my return on investment would be calculated based on
    nav vs. cost basis (1100)

    in a roth ira wouldn't my cost basis remain at 1000 because i didn't have to
    pay taxes on the dividends?

    i'm showing in some of my roth - ira mutuals annual returns %'s that are
    what i think are less than my actual returns because they are adding any
    reinvested dividends or gains to my initial investment.

    does this make sense or is this more of a "non sequitur"?

    bob




    that i would be ridiculed for my confusion about this problem...> "That is a
    non-sequitur". i never heard that saying before but after googling it I
    understand it know. ma
    --
    bob


    "Cal Learner-- MVP" wrote:

    > In microsoft.public.money, bobmoneyquestion wrote:
    >
    > >When calculating my cost basis for a mutual fund in a roth-ira, money
    > >includes any reinvested dividends and capital gains to the cost basis thus
    > >when generating returns that are not right.
    > >
    > >because roth accounts are pretaxed any dividends or capital gains are not
    > >taxed and should not be added to the cost basis.

    >
    > That is a non-sequitur.
    >
    > >
    > >i've gone into the account settings and checked that this account is a
    > >retirement account and a roth-ira.
    > >
    > >any suggestions on how to fix this so i can determine what my actual returns
    > >are?

    >
    > I could try to explain why shares bought with dividends are
    > logically part of the basis. From a tax point of view, can we at
    > least agree that the "basis" of the shares is moot?
    >
     
    bobmoneyquestion, May 3, 2006
    #9
  10. bobmoneyquestion

    Dick Watson Guest

    Since the only use of "cost basis" is in computing taxable capital gains and
    there is no such thing for a Roth IRA, I'm not sure why you'd care. I.e.,
    cost basis is not relevant to a Roth IRA.

    At any rate, even if this were a conventional investment account where gains
    and/or dividends were taxable, the reinvested dividends ***are*** part of
    your cost basis. They "pay" you the dividend, you pay tax on it, and then
    reinvest it. You are reinvesting "after tax" money. It's no different from a
    tax point of view than the money you put in in the first place. So, the
    reinvested amount adds to your cost basis. That's how this cost basis stuff
    works. I think that was Cal's point. I.e., except in accounts where cost
    basis is irrelevant, reinvested dividends do add to your cost basis.

    I'm sure Cal understood your question. This isn't a knock, but I think he
    understood it better than you did--as noted above.

    "bobmoneyquestion" <> wrote in
    message news:...
    > Cal learner...i didn't realize that this was a website where MVP's would
    > ridicule you for being confused about a problem. If this is beneath your
    > scope of expertise maybe someone else can help me.
    >
    > I'll try to explain my problem again:
    >
    > let's say i invest 1000 in mutual fund xyz(in a roth-ira) in 2005 and it
    > pays me 100 in dividends which are reinvested.
    >
    > in a regular account my cost basis would jump to 1100 because of the
    > reinvested dividends and my return on investment would be calculated based
    > on
    > nav vs. cost basis (1100)
    >
    > in a roth ira wouldn't my cost basis remain at 1000 because i didn't have
    > to
    > pay taxes on the dividends?
    >
    > i'm showing in some of my roth - ira mutuals annual returns %'s that are
    > what i think are less than my actual returns because they are adding any
    > reinvested dividends or gains to my initial investment.
    >
    > does this make sense or is this more of a "non sequitur"?
     
    Dick Watson, May 3, 2006
    #10
  11. Cal Learner-- MVP, May 3, 2006
    #11
  12. bobmoneyquestion

    arthur Guest

    In the nonsense of the power money hungry US Congress they try to
    divide dividends into 2 classes:

    1. dividends paid from taxed company profits
    2. dividends paid from non taxed company assets ie profits < dividend.

    In case number 2 the dividends are not taxed but one is supposed to
    deduct the dividend from the cost basis ie reduce the cost basis.

    So, how is Money to know what basis the dividends?
    As was said, for an IRA it makes no difference.

    And, in case 1. they somehow justify double taxation using their lie
    legal skills...
    Those bastards.

    arthur
    ==

    On Tue, 2 May 2006 20:04:01 -0700, bobmoneyquestion
    <> wrote:

    >Cal learner...i didn't realize that this was a website where MVP's would
    >ridicule you for being confused about a problem. If this is beneath your
    >scope of expertise maybe someone else can help me.
    >
     
    arthur, May 3, 2006
    #12
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