Rev. date: 12/21/2012
In order to figure your gain or loss using an average basis:
- You must have acquired the shares at various times and prices,
and
- You must have left them on deposit in an account handled by a custodian or agent who maintains an account for the acquisition or redemption of these
shares.
To calculate average basis:
- First, add up the cost of all the shares you own in the mutual
fund.
- Divide that result by the total number of shares you own.
- This gives you your average per share. Multiply that number by the number of shares
sold.
You may no longer use the double-category method for figuring your average basis. If you were using that method for shares you acquired before April 1, 2011 and you sell, exchange or otherwise dispose of those shares on or after April 1, 2011, you must figure the average basis of those shares by averaging together all identical shares in the account on April 1, 2011, regardless of holding
period.
Rev. date: 12/21/2012
A mutual fund is a regulated investment company that pools funds of investors allowing them to take advantage of a diversity of investments and professional asset
management.
You own shares in the fund, but the fund owns assets such as shares of stock, corporate bonds, government obligations, etc. One of the ways the fund makes money for you is to sell these assets at a
gain.
If the asset was held by the mutual fund for more than one year, the nature of the income is capital gain, which gets passed on to you. These are called capital gain distributions, which are distinguished on
Form 1099-DIV (PDF) from other types of income such as ordinary dividends.