01 February, 2009

Hello, H & R Block

I had my first job when I was the youngest you could possibly be and have an official job. I think I was 15 and a half years old. I worked at a pizza place called Papa Gino's on the East Coast. There are probably about a hundred of them. Actually, I might as well go look at Wikipedia and tell you how many of them there are. I've got time. It appears to have originated in East Boston, in 1961, by Helen and Michael Valerio. However, Wikipedia does not tell us how many stores there are. Instead I go to their official website. From their website, we get the goods: 170 stores. From what I can tell from my most recent experience with Papa Gino's, it appears their pizza quality has deteriorated significantly since when I worked there. I'm sure it's about making higher profit by using cheaper ingredients. The crust and sauce suck now. Why does everything get worse over time?

But alas, that is not the topic of this blog. Easy for me to go on the pizza rant, though.

So, since that first job, in Spring of 1984, perhaps, I have done my own taxes every single year. There have been years where it was trivial, and years where it took a little bit of effort. And then there were years where I had to do some guesswork related to capital gains. But this year will be the first year that I am not sure I want to do it myself. But maybe I do. I am just not sure. The factors contributing to this are primarily all related to having purchased a home. The home purchase itself is not a big problem. But the big problem is that I sold a whole bunch of extremely long-term (non-retirement) investments, in order to have money for the downpayment. If you've ever sold stock, then you know that when it comes tax time, you need to calculate capital gains based on what you sold it for minus what you paid for it. That is the capital gain (or loss, as the case may be). In my case, I have a series of problems here. In a nutshell, what all these problems come down to is one simple thing: I have absolutely no idea what I paid for these holdings that I sold, and I am not sure it would be possible without forensic science to figure out the answer.

Why is this the case?

Well, most of these investments were purchased over 10 years ago. And they were purchased in monthly installments, so the purchase prices were different every month. Half of the investments were moved to Schwab about 8 years from T. Rowe Price, so the price and transaction history is not continuous. The other half of the investments were automatically transitioned from one fund corporation (Invesco) to another (AIM) at some point in time, presumably because of a merger, so that history may be difficult to track. Combine this with the fact that all six investments have had their dividends reinvested every time they are paid, and I have basically got hundreds and hundreds of purchases, at an equally variable number of prices over the course of the last, say, 12 years.

From what I can see, in cases like this, there are no clear rules about what to do. And I am at least moderately confident that I might have almost zero capital gain due to the two big dips that occurred in the last year, and back in 2001. So I don't want to do a "good-faith estimate" of cost-basis and end up screwing myself.

Chances are, that's exactly what I should do. Because it's likely that H & R Block will want to charge me a lot of money to try to obtain a portion of this history. It will involve massive hassle on my part. The best bet, I think, will be for me to look at what the price was 10 years ago, and what the price is now, and use that difference in price to determine my actions. Screw the dividend factoring. Screw the dollar-cost averaging factoring. Just look at what it was, versus what it is. The downside of that is that it might unfairly penalize me. I'll have to do the math. If it looks like I am paying more than hundreds of dollars in capital gains, then maybe I'll enlist the tax man to do the math for me.

The other reason it might be a good idea to go through a tax preparer is that they might know additional things I could write-off with respect to my home purchase. Maybe I can write-off a new refrigerator and washer and dryer, if the house did not come equipped with them? Things like that are worth investigating. 

It just feels a little sad to have made it 25 years of doing-it-myself, only now to have to cave in to the experts.

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