What do you do if you're selling some stock and don't have a record of what you paid for it many years ago? How do you pay tax on it?
Well, you must prove the cost of your shares when you sell them. If you can't, the IRS may not allow you a "cost basis" with which to reduce your sale price and compute your gain on the shares. Your entire sales price may end up subject to capital gain taxes. (Gulp!)
The broker's records may be long gone now (though it never hurts to contact your brokerage and ask). If you purchased shares directly from a company, it may have a record of the transaction. If not, you might try to reconstruct a record by finding the canceled check and the stock's price when you bought it, to determine how many shares you originally bought. Document your process in case Uncle Sammy wants to have a discussion (read: audit) with you about it. If your arguments and analysis seem reasonable, you may be fine.
Ideally, though, always hang on to your purchase records for stock, property, and other assets.
For more info on taxes, head to the IRS website, or the Fool's Tax Strategies area, where we feature articles on a host of tax topics. You can get answers to questions on our Tax Strategies discussion board, too -- or see what everyone else is talking about.