Tax Tips
by Charles B. Carlson, CFA
Dow Theory Forecasts

With many investors now starting the task of doing their 2002 income taxes, it's important to keep the following points in mind:

• Remember to include purchase fees in your cost basis. For example, if you buy 100 shares of stock for $10 per share, and pay a purchase fee of $10, your total cost basis is $1010 (100 shares at $10 per share plus the $10 in commissions).
  
  
• If you sell shares in a stock in which you have had purchases made with reinvested dividends, make sure you add back those reinvested dividends to your cost basis. Neglecting to do so will reduce your cost basis, increase your profit, and, therefore, increase your tax liability.
  
  
• After you offset any investment gains with losses, you can deduct up to an additional $3,000 in losses for 2002. For example, let's say you have realized gains for 2002 of $5,000 and realized losses of $10,000. You can use the losses to offset your gains, and with the $5000 in excess losses, deduct an additional $3,000 from your income.
  
  
• You can carry over any unused realized losses to future years. Using our example above, you can use the carryover losses of $2,000 in 2003 to offset any realized gains for the year.

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