FAQs

[h1-cufon]Frequently Asked Questions[/h1-cufon]

[section title=”Don’t brokerage firms provide this information?”]
There is a widely misconceived notion by investors that their brokerage firms provide cost basis information. SEC regulations presently require that financial institutions only report the price at which a security was sold. There is absolutely no requirement placed on these financial institutions to provide information regarding the purchase price, as well as the adjusted price over time. Although most brokerage firms provide some cost basis information, their methods are not consistent or standardized.
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[section title=”If brokerage firms don’t provide this information, then how do investors get it?”]
That is the problem. Currently there is no single reliable resource that provides accurate adjusted cost basis information. When investors are faced with the realization that it is their responsibility to calculate and report this information for their securities, they are left with information that is archived and incomplete at best. The task is then further complicated when an investment was purchased long ago and specific information regarding the purchase date is no longer available.
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[section title=”Can you give me one example of the cost basis retrieval problem?”]

As today’s investment environment becomes more complex, so does the task of keeping track of those investments. For example, let’s say you purchased shares of AT&T twenty years ago and you have held those shares up to today. What you purchased back then was quite different than what you now own today.

With the spin-offs of the seven baby bells in 1983, the 1996 spin-off of Lucent and NCR and then a 3-for-2 stock split after that, figuring out the new cost basis for your original shares can be a nightmare. Not to mention all of the other capital changes the Bell Companies each went through!

Now which of these activities affects the original cost basis per share? If you guessed all of them, you are right! Now, how many of them affect the original number of shares? All but two – return of capital and spin-offs.
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