Direct Stock Purchase and Dividend Reinvestment Plans

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    Dear All,

    We have invested in direct stock purchase (DSP) and dividend reinvestment plans (DRIPs). We have covered and non-covered transactions. Due to poor customer service of transfer agents (Computershare, AST etc.) and also high fee, we are transferring them to Schwab. I need to provide the cost basis for non-covered shares to Schwab. I have couple of questions in this regard:

    1. Looking through monthly/yearly account statements, transfer agents provide transaction date and settlement date. I am considering transaction date as “trade date” for tax purposes. Is that correct?

    2. American Stock Transfer (AST) has service charge for re-investing dividends. Service charge consists of 4 separate fees: 1) the DRIP fees themselves, charged by American Stock Transfer who administers the plan; 2) transaction fee and commission for the purchase of shares; 3) Dividend processing fee per American Depository Shares (ADS). Dividend processing fee is levied by Deutsche Bank (DB) for crediting the dividend to ADR holder’s account; 4) AST also charges ADR fee. Can I consider all the above fees for cost basis? They are categorized as “fee.”

    AST is mislabeling them in account statements as “service charge” by pooling different fees without giving a detailed breakup. I have to contact the company investor relations to collect information about service charges. Please provide your comments and suggestions. With regards, Dabu1989.


    You don’t mention how large the fees are. Have you considered purchasing low cost index funds instead which you can get at Schwab for very low costs.
    That would get you a diversified portfolio w/o the individual stock risk and reduce your costs (both operating expense ratio and commission dramatically.
    ER is 0.03-0.06% and commission is 0.

    A calculation using the same gross return and different “costs” would be useful. A small difference compounded over time makes a bigger difference.

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