Cost Basis Accounting

Upon implementation of an investment strategy, NWCM requests various documents and records. Our operations team works to establish an accurate "cost basis" for the investments owned. NWCM can track cost basis using all possible methods: average costs, FIFO, LIFO, highest cost, lowest cost, and specified tax lot. Fund companies and brokerage firms only track cost basis-if they track it at all-using average cost accounting. NWCM's ability to specify any one of the permitted methods can significantly reduce tax liability when partial positions of a security are, or should be, sold in a given tax year.

A common example of tax-efficient portfolio management is to harvest any losses and use them to offset taxable gains in the portfolio. However, many investors own mutual funds and fail to implement a practice NWCM employs each year. Most funds pay the majority, if not all, of their dividends in the fourth quarter of the year. Having an accurate and up-to-date knowledge of a fund's cost basis allows NWCM to determine if the client should accept the tax consequences of receiving a dividend a fund will pay versus selling the fund prior to the ex-dividend date and accept the tax consequences of the capital transaction associated with its sale. Sometimes, the latter results in a smaller tax consequence, or it effectively converts the receipt of a dividend that would be largely ordinary income to one that could be long-term capital gain.

We prepare reports for the client's CPA that consolidate multiple 1099's received from two or more custodians. We prepare Realized Gain and Loss Reports that eliminate the client's need to gather up information to send to the client's CPA for tax return filings.