Tip of the Week: When to Toss Tax Records (5/17/99)

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	When to Toss Tax Records Financial Tip of the Week by Deloitte & Touche OnLine May 17, 1999

You don't have to hold on to all your statements and forms forever.

See our archive of previous tips on your money, your taxes and your financial plan.

Now that the April 15 filing deadline has come and gone you may be wondering what to do with the shoebox full of records.

As a general rule, the IRS has three years from the tax return due date (plus extensions) to examine the return. Consequently, taxpayers should save substantiating records at least that long. Longer holding periods are recommended for some documents. For example, taxpayers should establish a permanent file for the closing statement from the purchase of a personal residence, receipts for any improvements made to it and the closing statement from its sale.

Securities transactions also merit a permanent folder. Confirmation notices for securities transactions and monthly or year-end summary account statements from mutual funds, which show an investor's cost basis, should be permanently retained.

Finally, a person who receives property as part of a bequest should obtain a copy of Form 706 of the Federal Estate Tax filed by the donor's estate. That form will show the fair market value of the property on the date of the donor's death. That figure, combined with any gift tax paid on the transfer of the property, represent the donee's basis. The cost basis is needed to determine an owner's capital gain when he or she sells the property.