With April 15 just around the corner, here are some basic rules to follow concerning taxes and your investments:

• Any dividends that you reinvest in your stocks are considered ordinary income for tax purposes. Thus, even though you didn't receive the actual dividend check, you are still responsible for paying taxes on those dividends.
• Any fees paid to purchase stock may be included in the cost basis of those shares.
• If you did not sell any stock in 2000, the extent of your tax "hassle" is simply including your dividend income as ordinary income on your income taxes. If you did sell shares during 2000, you'll have to account for the sale(s) on your income taxes. The first thing you'll need to do is determine if the gain/loss was short term or long term. Long-term gains, which are taxed at a lower rate, occur when you sell an investment you held for at least 12 months. If you sell an investment that you held for less than 12 months, you will pay taxes on those short-term gains (providing, of course, you have a profit in the investment). Short-term gains are taxed at ordinary tax rates.
• If you sell shares, you must determine your "cost basis" for the shares sold. The cost basis may be figured in two ways. The first way is the "specific-share" method. Under this method, you select the shares that you sell. Specific-share method allows you to sell shares with the highest cost basis, thus reducing your profit and potential tax liability. The second method is the "first-in, first-out" method. Under this method, you sell your oldest holdings first. This method will probably lead to a higher tax liability, since your oldest shares probably have the lowest cost basis and thus the biggest profits.
• If you sell all of the shares in a plan, your cost basis (assuming you've held all of the shares for at least 12 months) is simply the sum of the following three items: 1) the amount of your initial purchase (including purchase fees) 2) the amount of dividends reinvested (including purchase fees) 3) the amount of additional investments (including purchase fees). Add these three items, subtract from the sale proceeds, and this is your long-term gain/loss for tax purposes.
• If you sell shares in a holding that has spun off businesses since you owned the stock, you need to adjust your cost basis for these spin-offs. For example, if you owned Lucent Technologies before Lucent spun off Avaya, and you sold Lucent stock after the Avaya spin-off, you need to adjust your Lucent cost basis for the Avaya spin-off. You can obtain important cost-basis adjustment factors for spin-offs from companies. Also, for cost-basis adjustment factors for AT&T and its many spin-offs (Lucent, NCR, the Baby Bells, etc.), my AT&T Tax Wizard booklet is extremely helpful. To obtain a copy of the AT&T Tax Wizard (the price is $14.95, or $9.95 if downloaded via the Internet) call (800) 233-5922 or visit the following Web site - www.atttaxwizard.com.

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