7 mistakes to avoid on your 2012 tax return
Each time a stock or mutual fund reinvests dividends, it’s the same as making a new purchase of shares. The amount of the reinvested dividend adds to your tax basis when you calculate your taxable gain from a sale. Make sure you don’t overpay the IRS. Mutual funds generally track the average basis of shares and automatically include reinvested dividends in the calculation. Ultimately it’s up to you to make sure you calculate the gain properly.
Source: Rick Rodgers, president of Rodgers & Associates.