Capital Loss tracking for asset purchased in 2007
I purchased shares in a REIT in 2007 with a cost basis of $10 per share. Shares were then added via monthly dividend reinvestments. In 2008 until part of 2009 I elected to just receive dividends in cash. Later in 2009 I resumed dividend reinvestments until July 2014. Each year the REIT would revalue it's per share price (always downward). In 2014 the shares were valued at $6.94 per share. In 2015 the REIT sold of a portion of their properties and returned the cash from the sale to shareholders. With that they restated the new cost per share value to $4.00. By July 2021 the value per share was lowered to $2.89. In August 2021 the REIT did a 10 for 1 reverse split so now the per share value was listed at $28.90. Then the REIT became listed on the stock exchange so now we shareholders can liquidate whenever we choose. In addition over the years a lot of the quarterly dividends were "non dividend distributions", or a return of principal, thereby reducing the cost basis.
Since this began in 2007 and there have been custodian changes over the years, there has been no cost basis tracking for the shareholders. Fortunately I saved everything related to this REIT and all 1099's and put together a detailed spreadsheet documenting my average cost basis per share is $47.7609. Currently the stock exchange shows the stock selling in the $25 range and I am prepared to sell at a loss.
My question is with this many years of activity with the REIT stock, will the FreeTaxUSA program provide me the tools to record this sale and to then supply the IRS what they need to show support for the capital loss. Or would I need to go to a tax service to file my return in the year I sell?
Best Answers
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Thank you for your prompt and helpful response!
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You are welcome.
Answers
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Thank you for this detailed question, askthetaxman.
Your explanation shows that you have very good records showing your cost basis on the original investment. Your further detail shows that you kept up with the changes with a cost basis per share. When a sale happens, you will have a sales price (per share) and the number of shares sold. This is the information that will facilitate the reporting of this sale correctly. You can still use FreeTaxUSA as your tax service provider with this information. This is a normal stock transaction sale, and the tools are there for you to report when you sell the REIT investment.
Since this is a one property type of investment, you can click that type of investment reporting (rather than summary). The FreeTaxUSA software will calculate the capital loss based off of the total cost basis and sales price, where you calculate that by multiplying the shares by the per share amount. The One-by-One reporting option will not require you to send any information directly to the IRS when you file your taxes. You will want to keep all of the REIT records in your tax information for that tax year for a period of 3 - 7 years in case the IRS were to choose to audit your return.