Investors make decisions about which products to buy and when to sell them based on a number of factors. Changes in the economy, or in an investor's own list of needs and tolerance for risk, can lead to restructuring an existing investment. This can involve selling some assets in a portfolio to focus on others. In other cases, restructuring is outside of an investor's control, as in the case of a stock split or dividend cut. In each case, individual investors are responsible for accounting for changes that result from restructured investments.
1. Review your financial records and identify expenses associated with restructuring your investment. Do not include the cost of any new investment products you purchased. Add up broker fees, transaction fees and personal expenses you incurred while researching or performing the restructuring.
2. Collect tax forms from each of your investments, such as 1900-DIV dividend statements and 1099-INT interest statements. These forms will list your investment income, as well as any taxes that were withheld. Add up your investment income, or loss, using the appropriate worksheet for the tax return you plan to file.
3. Fill out a rough draft of your tax form. Include your investment expenses as a tax deduction and your investment income as taxable income. If you sold long-term investments, claim the profit from them as a capital gain per the tax return instructions. Include the taxes you already paid according to your tax forms on the payments section of the return.
4. Compare the draft of your tax return to your tax return from the previous year. Check for investments that are part of your current return that weren't there last year. Add up the income from these sources and subtract any income from investments that you claimed last year, but no longer own. Subtract your investment expenses to determine your total gain for restructuring your portfolio.
5. Calculate the total market value of each of your current investments. For stock, multiply the number of shares you own by the market price at the end of trading on a day you specify, such as the last trading day of the year. For bonds, use an online calculator, or present value formula to determine value. Using the same date as the previous year, calculate the value of your investments prior to restructuring. The difference between these results is your asset gain from restructuring.
- Track common information, such as your investment expenses and investment income, as you perform each transaction. This will make producing accounting totals for the year easier.
- Tax codes can change without warning from year to year. Always use the latest tax return instructions to avoid errors from using old instructions.
- If your investment restructuring is particularly complicated, which may be the case if you own a business, consult an accountant or tax professional to ensure that your accounting agrees with standard principles and produces accurate results.
Items you will need
- Financial records
- Tax forms
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