Calculating gain and loss for a securities transaction on IRS Schedule D requires only the dates of purchase and sale along with cost and sales proceeds. The cost of purchased securities is called the basis. When shares are purchased at different times, determining the basis becomes complicated. For example, when dividends are reinvested, the basis of acquired shares is the amount of the dividend used for the purchase. Therefore, records are required of each dividend amount, the number of additional shares purchased, and the dates of the purchases. Every reinvested dividend payment is the basis in newly acquired shares.
1. Describe the stock shares purchased with reinvested dividends in Column (a) of either Line 1 or Line 8 of Schedule D. Use Line 1 if you sold the shares one year or less after the dividends were reinvested. Use Line 8 if you sold the shares more than one year after the dividend reinvestment.
2. Place the date the shares were purchased with reinvested dividends in Column (b).
3. Record the sale date of the shares acquired with reinvested dividends in Column (c).
4. Enter in Column (d) the sales proceeds for the shares that were originally bought with reinvested dividends. This is the number of shares times the price per share of the sale.
5. State in Column (e) the dividend amount that was reinvested as basis in the shares.
6. Subtract Column (e) from Column (d) and report either a gain or loss in Column (f). Input a loss in parentheses.
- The basis for shares acquired by reinvested dividends includes any commissions or fees just like basis determination for any other securities purchase.
Items you will need
- Schedule D
- Record of dividend payment dates, amounts, and number of shares purchased with reinvested dividends
- Sales price for the shares purchased with reinvested dividends