Hello all,
Helpful thread.
I have an engineering background and rely on engineering notebooks, with periodic peer review and initialing to document experiments, inventions and such with date time stamps. When I began investing, (I didn't have an accountant at the time) this experience caused me to set up the following system.
I have been keeping a notebook, serial numbered, hard bound, numbered pages, for several years and enter every transaction I make in the following manner for purchases.
Date, Time, Ticker, Price, Quantity, Total (with commissions)
I then leave an empty line for exit information, filled in only when I exit the trade with the data showing the exit transaction location. Multiple entries are sometimes used (on the same line) if I exit in more than 1 transaction. (not done often)
Book SN, Page, Line, Quantity
When I am exiting from a position, I enter the following, in chronological order(i.e.: at the time I make the trade)
Date, Time, Ticker, Quantity, Total (minus commissions), Book SN, Page, Line, Quantity
I also have any full notebook pages initialed and dated by my CPA. (By a neighbor, before hiring accountant)
This notebook is now almost full (200 pages) and I am preparing to start the second volume. I have never been audited, so cannot state from first hand experience. However, my CPA has indicated that this form of record keeping, handwritten in my hand, everything in chronological order, dual entry, no empty lines on any page (except currently open positions), no missing pages, covering multiple years and periodic initialing by a "disinterested party" with date of review, showing completed pages will pass IRS review.
This method, while a bit tedious, allows me to select the most tax advantaged method. The only discipline required is to update the notebook at the time of the transaction identifying specifically the position that is being closed. A small price to pay for the flexibility provided.
If anyone knows of a case where this type of record keeping has been successfully attacked by the IRS, I'd appreciate the reference.
Thanks in advance,
Ira |
