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DPier also mentioned that you can just print out the appropriate columns and use that instead of putting every transaction on Schedule D. I've done this, too, and had no problem from the IRS, although I did attach it to the actual Schedule D, using it to calculate the total gain and losses that get transferred to the 1040.
Selective disclosure is the process by which companies provide professional analysts with what amounts to insider information -- "guidance," it's called -- before it is released to the public. Naturally, analysts are in favor of this, and just as naturally, we Fools think that concentrating information in the hands of a powerful few is quite contrary to the best interests of investors. Midnight tonight is the deadline for sending comments on the proposed rule changes, so if you have an opinion, now is the time to speak out.
Our Help Stop Selective Discloser special has an e-mail already addressed and waiting for your comments. A simple "I favor Proposed Regulation FD: File No. S7-31-99" is probably sufficient. (Or you could say you are opposed -- I didn't mean to put words in your mail!) I suspect that eloquence would be wasted as I doubt that they have time to pore over every word. They probably just count the pros and cons. By the way, you can also find the security industry's viewpoint in our special. They make an interesting case that the new regulation will reduce the amount of information available to investors by cutting off the flow to analysts who are now passing it on to investors. Hmmmmm.
Today we are going to finish up our discussion of record keeping with some suggestions from readers. A number of people wrote to praise one or another of the commercial programs such as Quicken and Microsoft Money, and they are indeed wonderful for anyone who is so inclined. I mentioned GainsKeeper.com yesterday as a great site for tracking your taxable gains, but they emphasize individual stocks rather than a complete portfolio, which doesn't let you evaluate your total performance against the indices.
Two other options have been proposed: One was the very pricey but apparently sophisticated Captools (www.captools.com). It provides both rate of return information and tax information, although it doesn't seem to automatically adjust your cost basis for corporate actions like name changes, splits, mergers, spin-offs, etc., as does GainsKeeper. I really like that service! The other program mentioned was the portfolio tracker at Microsoft's Money Central, which several readers pointed out would do CAGRs for both stocks and one's portfolio as a whole. I haven't checked it out, though.
My final take on all this is that there is still no service that does it all: true portfolio return tracking, capital gains accounting, and automatic adjustment of your cost basis for corporate actions. This seems to be a natural function for the online brokers to incorporate. They already have the information about your account, and they already get all of the corporate action information directly from the corporations. I'm sure some of them are working on an integrated package that will do it all, though, if I am really going to be honest, I would have to admit that I want all that and cheap trades, too. Having just had a taste of what it's like to try and develop portfolio tracking software, I know that's asking for a lot.
Speaking of developing portfolio-based software, I have put up still another version of my spreadsheet, so if you've downloaded an earlier version, please dump it and download this latest version. It works better -- as in "more accurately." My attempts to adapt something that worked perfectly well for me to something that could be shared with other people have convinced me that I do not have a future in software development.
One potentially very useful comment came in from [email protected], who suggested arranging the columns of the spreadsheet in the same order that they appear on Schedule D. How logical. I tried it, and found that I had a really tough time entering the information in that sequence, but that's just me. If you want to try that, it's quite simple to rearrange columns in Excel. Just insert a blank column and drag the column you want there over to the blank one. The formulas will all adjust to the new locations automatically. Here's the sequence of information you will need for Schedule D:
[email protected] suggest filing the trade confirmations by company rather than date in a loose-leaf binder. If you trade frequently, that would make it much easier to find a company than just dumping all your buy confirmations in a "Pending" file as I do.
David Hogue proposed what to me sounds like a whole lot of trouble, but then I've never tried it. He scans everything he gets from his broker and stores the images on his hard drive. Then, once a year, he burns the documents and his spreadsheet onto a CD-ROM and saves it, essentially forever. That strikes me as overkill right now, but ask me next year when I'm missing something important in my files!
Elaine Weems suggests keeping a running "fake" Schedule D throughout the year so that any time a stock is sold, the gain (or loss) can be entered right then. That automatically keeps everything in the right place. Elaine also points out that it has the advantage of letting her see if she owes estimated taxes. As many of us have found to our annoyance, Uncle Sam expects his cut right away, if we have a large capital gain. In spite of the fact that it could easily be offset by a capital loss in a later quarter, one is expected to pay estimated taxes on the gains as they occur, or at least within a few months.
As Roy Lewis points out in Estimated Taxes, the penalties are not severe. They amount to nothing more than interest on any estimated taxes that should have been paid. Since the money that would have paid those taxes can stay in your investment account, presumably earning money, there isn't a whole lot of reason to get excited about estimated taxes that I can see.
Well, that's it. You've got all weekend to get your filing system in order for the year. Have fun.
Fool on and prosper!