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Zecco.com » General Investing » Tax Matters » Tax question: commission allocatio...
Last post 10-01-2008, 11:36 AM by Bryan K. 3 replies.
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  •  09-30-2008, 10:36 PM 40463

    Tax question: commission allocation

    Reply Quote
    Let's say I buy 20 shares of a stock at $20 a share, and I pay a $4.50 commision through Zecco.  My actual cost for this group of shares is $404.50 for tax purpose.  Now, let's say I decide to sell 10 of those shares for $25 a share the following month, and the commission is free.  Where do I allocate the $4.50 purchase commission for tax purpose?  I made $250 revenue on my sale.  Do I subtract the entire commision right away, where $250 minues $204.50 would equal a profit of $45.50?  Do I prorate the commission proportionately to the percentage of the initial stock that I ended up selling, where $250 minues $202.25 would equal a profit of $47.75?  Or do I put off the entire commission, where $250 minus $200 equals a profit of $50?

  •  10-01-2008, 3:26 AM 40512 in reply to 40463

    Re: Tax question: commission allocation

    Reply Quote
    If you look at your account statement, you will see that the commissions have already been included in every buy or sell transactions. 

  •  10-01-2008, 7:41 AM 40518 in reply to 40463

    Re: Tax question: commission allocation

    Reply Quote
    The commission is applied to each part of the trade that it was a part of on a per-share basis.  Your second scenario, pro-rating the commission, is the correct one, here's how it works out for anyone who didn't follow where you got the numbers:

    The per-share cost basis is 20.225 ((20 dollars *20 shares + 4.50) / 20 shares).  Your amount realized is 250 (25 dollars * 10 shares).  The total cost basis of those shares is 202.25 (20.225 * 10 shares).  So, the gain is  47.75 (Gain=  Amount realized - total cost basis = 250-202.25).

  •  10-01-2008, 11:36 AM 40540 in reply to 40518

    Re: Tax question: commission allocation

    Reply Quote
    Thanks for the responses.  I think I'm ready for tax time next year...going to try doing them myself for the first time. 
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