Vanguard Cost Basis Question

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grettman
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Vanguard Cost Basis Question

Post by grettman »

I have a non-retirement brokerage account with Vanguard. I have not kept any records of my purchases which go back at least 15 years.

I heard some thing on Ric Edelman’s show that has me worried that I will not be able to determine what my cost basis is when it comes time to sell shares.

All my life, the adult part at least, I have been an accumulator and haven’t had to deal with selling shares before. While I am not going to do this anytime soon, I am worried because the online records available from Vanguard only go back to 2014.

Should I be worried? Is there anything that I should be doing now? Obviously I’m going to start downloading all the statements that I can say that I have them for my records.
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anon_investor
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Re: Vanguard Cost Basis Question

Post by anon_investor »

grettman wrote: Tue Oct 19, 2021 1:57 pm I have a non-retirement brokerage account with Vanguard. I have not kept any records of my purchases which go back at least 15 years.

I heard some thing on Ric Edelman’s show that has me worried that I will not be able to determine what my cost basis is when it comes time to sell shares.

All my life, the adult part at least, I have been an accumulator and haven’t had to deal with selling shares before. While I am not going to do this anytime soon, I am worried because the online records available from Vanguard only go back to 2014.

Should I be worried? Is there anything that I should be doing now? Obviously I’m going to start downloading all the statements that I can say that I have them for my records.
Turn on SpecID Cost Basis Method now if you can. All your purchase from around 2011/2012 should have the Cost Basis recorded by Vanguard since that became a legal requirement for all brokerages. For the purchases prior to that you will need to have your statement as those would be considered "uncovered shares" (vs, "covered shares" where Vanguard is required to keep track of your cost basis. If Vanguard does not have statements prior to 2014 online, you might want to contact them to see if they can provide you with the older statements.
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iceport
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Re: Vanguard Cost Basis Question

Post by iceport »

grettman wrote: Tue Oct 19, 2021 1:57 pm I have a non-retirement brokerage account with Vanguard. I have not kept any records of my purchases which go back at least 15 years.

I heard some thing on Ric Edelman’s show that has me worried that I will not be able to determine what my cost basis is when it comes time to sell shares.

All my life, the adult part at least, I have been an accumulator and haven’t had to deal with selling shares before. While I am not going to do this anytime soon, I am worried because the online records available from Vanguard only go back to 2014.

Should I be worried? Is there anything that I should be doing now? Obviously I’m going to start downloading all the statements that I can say that I have them for my records.
grettman —

You should be able to obtain your transaction history directly from Vanguard online. If you go to the "balances and holdings" page (the older style page format), there should be a "transaction history" link directly above your taxable account holdings. The custome date range allows you to select a starting date going back to 1/1/1993.


If I were you, I'd pull up those records, download them, and enter all the transactions and cost bases into a spreadsheet, with a separate worksheet for each fund.

That way, when the time comes to sell, you can choose to use a Specific ID cost basis method, and just ignore the average cost basis accounting Vanguard will furnish you by default for all non-covered shares.
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
CedarWaxWing
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Re: Vanguard Cost Basis Question

Post by CedarWaxWing »

anon_investor Wrote:

[/quote]

Turn on SpecID Cost Basis Method now if you can. All your purchase from around 2011/2012 should have the Cost Basis recorded by Vanguard since that became a legal requirement for all brokerages. For the purchases prior to that you will need to have your statement as those would be considered "uncovered shares" (vs, "covered shares" where Vanguard is required to keep track of your cost basis. If Vanguard does not have statements prior to 2014 online, you might want to contact them to see if they can provide you with the older statements.
[/quote]

Are you saying that when Vanguard shows a "cost basis" for the non covered shares... the displayed "cost basis" is not correct? When I look online and select "cost basis"... it shows a number for both the covered, and non covered shares, although I do not have a way to verify the accuracy of those numbers.
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iceport
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Re: Vanguard Cost Basis Question

Post by iceport »

CedarWaxWing wrote: Tue Oct 19, 2021 2:39 pm anon_investor Wrote:

Turn on SpecID Cost Basis Method now if you can. All your purchase from around 2011/2012 should have the Cost Basis recorded by Vanguard since that became a legal requirement for all brokerages. For the purchases prior to that you will need to have your statement as those would be considered "uncovered shares" (vs, "covered shares" where Vanguard is required to keep track of your cost basis. If Vanguard does not have statements prior to 2014 online, you might want to contact them to see if they can provide you with the older statements.
Are you saying that when Vanguard shows a "cost basis" for the non covered shares... the displayed "cost basis" is not correct? When I look online and select "cost basis"... it shows a number for both the covered, and non covered shares, although I do not have a way to verify the accuracy of those numbers.
I'm not anon_investor but I'll offer this reply. Vanguard certainly knows your cost bases for non-covered shares, but they are not required to furnish non-covered share cost bases to the IRS. Vanguard only provides the average cost basis method to its customers for non-covered shares. If you look at the cost basis for non-covered shares, there's only a single entry, with a purchase date of "various," right? That's because the cost per share being reported is the cost of all the non-covered shares averaged across all of those shares.

If you use the average cost basis method when reporting sales of non-covered taxable shares, then the cost bases reported by Vanguard will be correct. If you actually use some other cost basis method, then Vanguard's average cost basis accounting, while not technically "wrong," is irrelevant. Vanguard furnishes that average cost basis accounting to you for your convenience, but there's no requirement for you to use that method, simply because it's all Vanguard gave you. And the IRS never sees it.

Armed with your own records, you can use whatever cost basis method you want for non-covered shares.
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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goingup
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Re: Vanguard Cost Basis Question

Post by goingup »

I don't keep my own records and rely on Vanguard to do it.

Cost basis prior to 2012 is average cost. After 2012, brokers were required to keep track of cost basis. You can have your cost basis method set to "SPEC ID" for these post-2012 shares.

I don't think this is cause for concern, but if you want to sell individual lots at their cost basis, change to SPEC ID.
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Re: Vanguard Cost Basis Question

Post by grabiner »

If you are charitably inclined, you can also avoid the problem of not knowing the cost basis by using those shares for charitable contributions. (Don't do this just for your tax benefit, but if you want to donate $5000 to your alma mater or house of worship, they should be happy to accept the donation of appreciated stock and avoid any capital-gains tax for you.)

I do know my cost basis, so the stock i use for charitable donations is my lowest-basis stock, or the stock I hold in my taxable account and would prefer not to hold but won't sell for the tax cost.
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calmaniac
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Re: Vanguard Cost Basis Question

Post by calmaniac »

goingup wrote: Tue Oct 19, 2021 5:13 pm I don't keep my own records and rely on Vanguard to do it.

Cost basis prior to 2012 is average cost. After 2012, brokers were required to keep track of cost basis. You can have your cost basis method set to "SPEC ID" for these post-2012 shares.

I don't think this is cause for concern, but if you want to sell individual lots at their cost basis, change to SPEC ID.
Hopefully, this is not too far off-topic. I have a Fidelity account and have legacy stock that I've owned since 1993. When I click on Research/Purchase History/Lots I get the cost basis of individual lots going all the way back to 1993. From the above discussion, that level of detail going back to 1993 is just the individual approach of that specific brokerage firm?
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increment
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Re: Vanguard Cost Basis Question

Post by increment »

calmaniac wrote: Tue Oct 19, 2021 8:51 pm
goingup wrote: Tue Oct 19, 2021 5:13 pm Cost basis prior to 2012 is average cost. After 2012, brokers were required to keep track of cost basis. You can have your cost basis method set to "SPEC ID" for these post-2012 shares.

I don't think this is cause for concern, but if you want to sell individual lots at their cost basis, change to SPEC ID.
Hopefully, this is not too far off-topic. I have a Fidelity account and have legacy stock that I've owned since 1993. When I click on Research/Purchase History/Lots I get the cost basis of individual lots going all the way back to 1993. From the above discussion, that level of detail going back to 1993 is just the individual approach of that specific brokerage firm?
Average cost is (mainly) for mutual funds. For tax purposes, in the case of stocks and the like, you can use average cost for reinvestments, but not all purchases.

So if your holding isn't a mutual fund, it wouldn't be useful for Fidelity to show you average cost. Be glad that they have kept track of each lot for you.
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Re: Vanguard Cost Basis Question

Post by placeholder »

increment wrote: Tue Oct 19, 2021 9:15 pm Average cost is (mainly) for mutual funds. For tax purposes, in the case of stocks and the like, you can use average cost for reinvestments, but not all purchases.
I don't believe that to be correct and that average basis is only for mutual funds not individual equities including etfs.
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grettman
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Re: Vanguard Cost Basis Question

Post by grettman »

iceport wrote: Tue Oct 19, 2021 2:17 pm
grettman wrote: Tue Oct 19, 2021 1:57 pm I have a non-retirement brokerage account with Vanguard. I have not kept any records of my purchases which go back at least 15 years.

I heard some thing on Ric Edelman’s show that has me worried that I will not be able to determine what my cost basis is when it comes time to sell shares.

All my life, the adult part at least, I have been an accumulator and haven’t had to deal with selling shares before. While I am not going to do this anytime soon, I am worried because the online records available from Vanguard only go back to 2014.

Should I be worried? Is there anything that I should be doing now? Obviously I’m going to start downloading all the statements that I can say that I have them for my records.
grettman —

You should be able to obtain your transaction history directly from Vanguard online. If you go to the "balances and holdings" page (the older style page format), there should be a "transaction history" link directly above your taxable account holdings. The custome date range allows you to select a starting date going back to 1/1/1993.


If I were you, I'd pull up those records, download them, and enter all the transactions and cost bases into a spreadsheet, with a separate worksheet for each fund.

That way, when the time comes to sell, you can choose to use a Specific ID cost basis method, and just ignore the average cost basis accounting Vanguard will furnish you by default for all non-covered shares.
Thanks for the tip! I was able to print my history to PDF but I couldn't download it. Very weird. Vanguard limits the date range to only 18 months of the download (it doesn't appear this way at first but once you put in the information, it rejects your request) but allows you print/display beyond 18 months.
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Re: Vanguard Cost Basis Question

Post by ikowik »

iceport wrote: Tue Oct 19, 2021 2:17 pm
grettman wrote: Tue Oct 19, 2021 1:57 pm I have a non-retirement brokerage account with Vanguard. I have not kept any records of my purchases which go back at least 15 years.

I heard some thing on Ric Edelman’s show that has me worried that I will not be able to determine what my cost basis is when it comes time to sell shares.

All my life, the adult part at least, I have been an accumulator and haven’t had to deal with selling shares before. While I am not going to do this anytime soon, I am worried because the online records available from Vanguard only go back to 2014.

Should I be worried? Is there anything that I should be doing now? Obviously I’m going to start downloading all the statements that I can say that I have them for my records.
grettman —

You should be able to obtain your transaction history directly from Vanguard online. If you go to the "balances and holdings" page (the older style page format), there should be a "transaction history" link directly above your taxable account holdings. The custome date range allows you to select a starting date going back to 1/1/1993.


If I were you, I'd pull up those records, download them, and enter all the transactions and cost bases into a spreadsheet, with a separate worksheet for each fund.

That way, when the time comes to sell, you can choose to use a Specific ID cost basis method, and just ignore the average cost basis accounting Vanguard will furnish you by default for all non-covered shares.
Thanks for this information, did not know it. But even if I download the cost basis of non-covered shares, will I able to pick out a specific lot to sell from them?
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iceport
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Re: Vanguard Cost Basis Question

Post by iceport »

ikowik wrote: Wed Oct 20, 2021 6:52 am
iceport wrote: Tue Oct 19, 2021 2:17 pm
grettman wrote: Tue Oct 19, 2021 1:57 pm I have a non-retirement brokerage account with Vanguard. I have not kept any records of my purchases which go back at least 15 years.

I heard some thing on Ric Edelman’s show that has me worried that I will not be able to determine what my cost basis is when it comes time to sell shares.

All my life, the adult part at least, I have been an accumulator and haven’t had to deal with selling shares before. While I am not going to do this anytime soon, I am worried because the online records available from Vanguard only go back to 2014.

Should I be worried? Is there anything that I should be doing now? Obviously I’m going to start downloading all the statements that I can say that I have them for my records.
grettman —

You should be able to obtain your transaction history directly from Vanguard online. If you go to the "balances and holdings" page (the older style page format), there should be a "transaction history" link directly above your taxable account holdings. The custome date range allows you to select a starting date going back to 1/1/1993.


If I were you, I'd pull up those records, download them, and enter all the transactions and cost bases into a spreadsheet, with a separate worksheet for each fund.

That way, when the time comes to sell, you can choose to use a Specific ID cost basis method, and just ignore the average cost basis accounting Vanguard will furnish you by default for all non-covered shares.
Thanks for this information, did not know it. But even if I download the cost basis of non-covered shares, will I able to pick out a specific lot to sell from them?
Actually, no. My post was a little misleading. For non-covered shares there is no capability of selecting specific tax lots. In the absence of that ability, all shares must be assumed to be sold on a first in, first out basis (FIFO). https://fairmark.com/investment-taxatio ... ing-rules/

But that's a form of specific ID, in that the specific tax lots of the shares sold are known (even if they aren't specifically identified), and the specific cost bases of those specific shares are reported, rather than an average cost basis.

Without the ability to actually select the most advantageous shares to sell, getting away from the average cost basis method is often of limited value. The oldest shares are likely to be some of the shares with the lowest cost bases, and the oldest are sold first.

Another caveat is that if you've ever sold any non-covered shares of that holding, and then reported the cost basis to the IRS using the average cost basis method, then you're stuck with the average cost basis for the rest of those non-covered shares.
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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goingup
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Re: Vanguard Cost Basis Question

Post by goingup »

calmaniac wrote: Tue Oct 19, 2021 8:51 pm
goingup wrote: Tue Oct 19, 2021 5:13 pm I don't keep my own records and rely on Vanguard to do it.

Cost basis prior to 2012 is average cost. After 2012, brokers were required to keep track of cost basis. You can have your cost basis method set to "SPEC ID" for these post-2012 shares.

I don't think this is cause for concern, but if you want to sell individual lots at their cost basis, change to SPEC ID.
Hopefully, this is not too far off-topic. I have a Fidelity account and have legacy stock that I've owned since 1993. When I click on Research/Purchase History/Lots I get the cost basis of individual lots going all the way back to 1993. From the above discussion, that level of detail going back to 1993 is just the individual approach of that specific brokerage firm?
Sorry, I don't know the answer to that question, but it's a good outcome to have cost basis for all shares.
increment
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Re: Vanguard Cost Basis Question

Post by increment »

placeholder wrote: Wed Oct 20, 2021 12:40 am
increment wrote: Tue Oct 19, 2021 9:15 pm Average cost is (mainly) for mutual funds. For tax purposes, in the case of stocks and the like, you can use average cost for reinvestments, but not all purchases.
I don't believe that to be correct and that average basis is only for mutual funds not individual equities including etfs.
I used to think so too, but the instructions for Form 8949 say:
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);
  • They are shares you hold in connection with a dividend reinvestment plan (DRP), and all the shares you hold in connection with the DRP are treated as covered securities (defined below); or
  • You acquired them after 2011 in connection with a DRP.
Katietsu
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Re: Vanguard Cost Basis Question

Post by Katietsu »

iceport wrote: Wed Oct 20, 2021 8:10 am
ikowik wrote: Wed Oct 20, 2021 6:52 am
iceport wrote: Tue Oct 19, 2021 2:17 pm
grettman —

You should be able to obtain your transaction history directly from Vanguard online. If you go to the "balances and holdings" page (the older style page format), there should be a "transaction history" link directly above your taxable account holdings. The custome date range allows you to select a starting date going back to 1/1/1993.


If I were you, I'd pull up those records, download them, and enter all the transactions and cost bases into a spreadsheet, with a separate worksheet for each fund.

That way, when the time comes to sell, you can choose to use a Specific ID cost basis method, and just ignore the average cost basis accounting Vanguard will furnish you by default for all non-covered shares.
Thanks for this information, did not know it. But even if I download the cost basis of non-covered shares, will I able to pick out a specific lot to sell from them?
Actually, no. My post was a little misleading. For non-covered shares there is no capability of selecting specific tax lots. In the absence of that ability, all shares must be assumed to be sold on a first in, first out basis (FIFO). https://fairmark.com/investment-taxatio ... ing-rules/

But that's a form of specific ID, in that the specific tax lots of the shares sold are known (even if they aren't specifically identified), and the specific cost bases of those specific shares are reported, rather than an average cost basis.

Without the ability to actually select the most advantageous shares to sell, getting away from the average cost basis method is often of limited value. The oldest shares are likely to be some of the shares with the lowest cost bases, and the oldest are sold first.

Another caveat is that if you've ever sold any non-covered shares of that holding, and then reported the cost basis to the IRS using the average cost basis method, then you're stuck with the average cost basis for the rest of those non-covered shares.
This is not generally true. I do not know how Vanguard handles mutual fund sales of non covered shares. But I have used multiple brokers to specify which shares of a non covered mutual fund that I would like to sell. First in, first out is the default if a specific lot is not specified and average cost basis is not in use.

Caveat, I was helping an elderly acquaintance last year to sell a stock purchased 35 yrs ago through payroll deduction. They told me they could not accept instructions specifying the lot to be sold. I do not know if that was true or not as it did not make a big enough difference for me to pursue.
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Re: Vanguard Cost Basis Question

Post by FactualFran »

ikowik wrote: Wed Oct 20, 2021 6:52 am Thanks for this information, did not know it. But even if I download the cost basis of non-covered shares, will I able to pick out a specific lot to sell from them?
Yes, you should be able to pick specific lots to sell. With shares covered by certain IRS regulations, the broker or other agent who maintains records of your account provides a way for you to specify what shares are being sold. Mutual fund shares acquired in 2012 or later are covered by those regulations. (Note: not all mutual shares acquired in 2012 or later are necessarily covered shares, such as share distributed in-kind from an IRA).

See the How to Identify Shares web page at fairmark.com.
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iceport
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Re: Vanguard Cost Basis Question

Post by iceport »

Katietsu wrote: Wed Oct 20, 2021 9:42 am
iceport wrote: Wed Oct 20, 2021 8:10 am
ikowik wrote: Wed Oct 20, 2021 6:52 am
iceport wrote: Tue Oct 19, 2021 2:17 pm
grettman —

You should be able to obtain your transaction history directly from Vanguard online. If you go to the "balances and holdings" page (the older style page format), there should be a "transaction history" link directly above your taxable account holdings. The custome date range allows you to select a starting date going back to 1/1/1993.


If I were you, I'd pull up those records, download them, and enter all the transactions and cost bases into a spreadsheet, with a separate worksheet for each fund.

That way, when the time comes to sell, you can choose to use a Specific ID cost basis method, and just ignore the average cost basis accounting Vanguard will furnish you by default for all non-covered shares.
Thanks for this information, did not know it. But even if I download the cost basis of non-covered shares, will I able to pick out a specific lot to sell from them?
Actually, no. My post was a little misleading. For non-covered shares there is no capability of selecting specific tax lots. In the absence of that ability, all shares must be assumed to be sold on a first in, first out basis (FIFO). https://fairmark.com/investment-taxatio ... ing-rules/

But that's a form of specific ID, in that the specific tax lots of the shares sold are known (even if they aren't specifically identified), and the specific cost bases of those specific shares are reported, rather than an average cost basis.

Without the ability to actually select the most advantageous shares to sell, getting away from the average cost basis method is often of limited value. The oldest shares are likely to be some of the shares with the lowest cost bases, and the oldest are sold first.

Another caveat is that if you've ever sold any non-covered shares of that holding, and then reported the cost basis to the IRS using the average cost basis method, then you're stuck with the average cost basis for the rest of those non-covered shares.
This is not generally true. I do not know how Vanguard handles mutual fund sales of non covered shares. But I have used multiple brokers to specify which shares of a non covered mutual fund that I would like to sell. First in, first out is the default if a specific lot is not specified and average cost basis is not in use.

Caveat, I was helping an elderly acquaintance last year to sell a stock purchased 35 yrs ago through payroll deduction. They told me they could not accept instructions specifying the lot to be sold. I do not know if that was true or not as it did not make a big enough difference for me to pursue.
Yes, you are correct. I always seem to forget about the relatively cumbersome option of contacting the brokerage to specify which non-covered tax lots to sell. Grabiner usually chimes in with that reminder, but I keep forgetting, probably just because I'd rather not have to rely on that process, hoping that it won't break down at one point or another.

At Vanguard, I think there's the option to send a secure message on their site, and possibly another option to send a written letter of instruction by mail(?).

FactualFran wrote: Wed Oct 20, 2021 12:31 pm See the How to Identify Shares web page at fairmark.com.
Thanks for that article! I hadn't seen it before.



Well, at least I did something correctly in this thread, and successfully led the OP to their transaction history. :oops:
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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