TRACKING PORTFOLIO ONLINE CAN SIMPLIFY TAX
CALCULATIONS
By Dolores Kong
03/12/2000
The Boston Globe
After AT&T spun off Lucent and NCR a few years ago,
Duncan Routh, a former Fidelity Investments account
manager, tried to figure out what the impact would be
on his taxes when he sold the stock.
"I really struggled at the time to find out what my
cost basis for AT&T was," recalled Routh, referring to
the original cost of investment that people must
track, through spinoffs and other changes, to figure
their taxes.
"This is my background, and I'm having a tough time,"
he said. "How about all the millions of investors who
own the stock?"
That led Routh, along with his brother,
brother-in-law, and another former Fidelity manager,
to start Quincy-based GainsKeeper.
The firm aims to help investors track their portfolios
online for spinoffs and other corporate actions for
tax purposes and monitor "wash sales," a potential tax
trap for some people who buy and sell the same stock
within 30 days.
Www.GainsKeeper.com, online since January, is the
latest entry into Internet portfolio tracking, an
increasingly competitive service offered by such sites
as:
- www.Quicken.com
- www.MoneyCentral.msn.com
- www.Morningstar.com
- www.CNBC.com
- www.ClearStation.com
Many mutual fund families and brokerage firms have Web
sites, too.
While many people use online services to track a
virtual portfolio of stocks they may one day be
interested in owning, others rely on them to keep
close tabs on the value of their actual investments.
The latest online tracking features allow people to
better monitor a real portfolio, although they may
make little difference for those who have set up a
virtual one.
Some sites require investors to type in their stock
holdings and transactions; others allow the
importation of data from their brokerage firm or home
money management software. Some automatically adjust
portfolios for stock splits, while others feature a
pop-up window or e-mail alert but require the user to
type in the split transaction.
For the most part, these services are free. Here is a
summary of some of the sites:
- www.GainsKeeper.com
The latest entry promises to do more than other sites
by being accurate enough to use with Schedule D, the
Internal Revenue Service form for calculating capital
gains and losses, even in the most complicated
situations such as a wash sale. IRS rules don't allow
people to write off a loss on the sale of a stock if
they bought back the stock within 30 days, requiring
them to add the dollar amount of the loss to the cost
basis of the stock they bought instead.
" `Am I even in a wash sale?' It's a difficult
scenario to identify. It's really one of those
calculations better left to a computer. We're ecstatic
to be able to provide it to active traders of the
world," said Routh, GainsKeeper's chief executive.
His brother Cameron is vice president of marketing,
his brother- in-law Chad Cook is president, and Greg
Alves is vice president of operations.
The service automatically adjusts registered users'
online portfolios for stock splits, spinoffs, mergers,
dividend reinvestments, and other actions for tax
purposes; keeps track of separate lots of a stock
bought at different times; and allows people to print
out a report detailing short-term and long-term
capital gains and losses that can be attached to a
Schedule D.
But the drawback is that people have to type in their
holdings and transactions from elsewhere, because
there is no way to import data.
For people who don't trade much, who keep good tax
records, or who would rather pay an accountant to
figure it all out, it may not be worth the extra
effort.
Routh said the company is working on forming
partnerships with brokerage firms that would allow
clients' trades to be automatically passed off to
GainsKeeper for record-keeping, which would reduce the
amount of data entry people have to do. He hopes to
keep the new service free and to keep adding features
to the site.
The privately held company, which just closed a $2.5
million round of private financing and added the
ability to track mutual funds, has more than 10,000
registered users and is beginning its first
advertising campaign Tuesday, Cameron Routh said.
- www.ClearStation.com
This wholly owned subsidiary of E-Trade, which bills
itself as "The Intelligent Investment Community," also
automatically adjusts users' portfolios for splits,
mergers, spinoffs, and other corporate actions, said
Will Winkelstein, vice president of marketing for the
San Francisco company.
While ClearStation doesn't adjust for wash sales, it
does allow users to print out a Schedule D-like
report, although the report may not be detailed enough
to file with the IRS.
The site's portfolio manager was rated in a 1999
Microsoft Press book entitled "Online Investing" as
"the best on the Web that does not require a software
download." (That's because Microsoft's
MoneyCentral.msn.com site does require a software
download.)
www.MoneyCentral.msn.com
This site's portfolio tracker isn't designed for tax
purposes, but it allows users to import their
investment data from certain brokerages and financial
software packages, such as Microsoft Money or Quicken,
and automatically adjusts for stock splits and
dividend reinvestments, said product manager Chris
Jolley and product planner Charles Hauck.
"The portfolio manager, because it's so powerful and
so customizable, really gives people the one-stop
shopping they're looking for," said Jolley, who cited
such other features as online graphs of individuals'
portfolio data and a portfolio review tool that
analyzes asset allocation and other aspects of your
investments.
- www.CNBC.com, www.Morningstar.com, www.Quicken.com
None of these sites automatically adjusts online
portfolios for stock splits or other actions, or keeps
track of tax consequences of stock transactions,
although each may offer a pop-up window or e- mail
alert to notify individuals of the changes they need
to make in their accounts as a result of corporate
news.
While officials representing each of the sites said
automatic stock-split adjustment and wash-sale
tracking are on the list of things to be added, they
pointed to existing features found in few other
places.
Patrick Sheridan, executive producer of CNBC.com,
cited the e- mail alerts that users of the portfolio
tracker can get, notifying them a few hours in advance
that the chief executive of a company they hold in
their portfolio will be on CNBC, or that a stock
they're watching has reached a certain price.
Mark Wright, director of tools and portfolio
development for Morningstar.com, said his site's
portfolio tracker has an "X-ray" capability that
allows users to analyze all their mutual fund and
individual stock holdings to check for overlapping
ownership of the same securities and asset allocation.
Karen Cleeve, spokeswoman for Quicken.com, which had a
record- breaking month in February with more than 262
million page views, said the portfolio tracker allows
users to personalize their automatic alerts. about
things like percentage changes in trading volume or
share prices.
Quicken.com will be launching new features in the next
month, but Cleeve said she could not yet reveal them.
SIDEBAR:
Figuring out your tax liability when you sell shares
of a company that has split or spun off stock can be
complicated, as this example shows:
July 1993: You by 300 shares of Marriott Corp. at $10
a share.
Aug. 2, 1999: You sell and you see Marriott is trading
at $10.375 that day.
If you figured the value of your investment was
$10.375 times 300 shares, or $3112.50, and your
taxable gain was only: $112.50.
You're wrong!
In reality, in the six years you owned the stock,
Marriott split and spun off shares a number of times,
so that by the time you sell, your original $3,000
investment, or cost basis, in 300 shares has been
reallocated this way:
300 shares of Host Marriot Corp. real estate
investment trust, cost basis $502.47
60 shares of Host Marriott Services, cost basis of
$61.44
600 shares of Class A common stock of 'new' Marriott
International, Inc., cost basis of $2,234.24
75 shares of Sodexho Marriott Services, Inc., cost
basis of $201.85
30 shares of Crestline Capital Corp., cost basis of
$459, a spinoff that was considered a taxable dividend
in 1998 and needs to be added to your original cost
basis of $3,000
The value of all these shares is $26.778.13 on August
2, 1999.
So your taxable gain is: $23,319.13 which is
$26.778.13 minus $3,000 (original cost of 300 shares),
and minus $459 (spinoff of 30 shares of Crestline
Capital).
SOURCE: GAINSKEEPER, INC.