Publication 564 - Mutual Fund Distributions - Internal Revenue Service

Revenue Service. They must provide or send

acquired all on the same day and for the same

2. Receive confirmation in writing from your

each customer a written statement with that in-

broker or other agent within a reasonable

price, figuring their basis is not difficult. How-

formation by February 15 of the year following

time of your specification of the particular

ever, shares are generally acquired at various

the calendar year the transaction occurred.

shares sold or transferred.

times, in various quantities, and at various

Form 1099-B, or a substitute, may be used for

prices. Therefore, figuring your basis can be

You continue to have the burden of proving

this purpose. If it is mailed, you should allow

more difficult. You can choose to use either a

your basis in the specified shares at the time of

adequate time to receive it before contacting the

cost basis or an average basis to figure your

sale or transfer.

payer. If you still do not get the form by February

gain or loss.

28, call the IRS for help.

First-in first-out (FIFO).

If your shares were

Report your sales shown on Form(s) 1099-B

acquired at different times or at different prices

Cost Basis

(or substitute) on Schedule D (Form 1040) along

and you cannot identify which shares you sold,

with your other gains and losses. If the total of

use the basis of the shares you acquired first as

You can figure your gain or loss using a cost

the sales price amounts reported on Form(s)

the basis of the shares sold. In other words, the

basis only if you did not previously use an aver-

1099-B in box 2 is more than the total you report

oldest shares you own are considered sold first.

age basis for a sale, exchange, or redemption of

on Schedule D (Form 1040), lines 3 and 10,

You should keep a separate record of each

other shares in the same mutual fund.

attach a statement to your return explaining the

purchase and any dispositions of the shares

difference.

To figure cost basis, you can choose one of

until all shares purchased at the same time have

the following methods.

been disposed of completely.

Taxpayer identification number. You

Table 3 (on the next page) illustrates the use

•

must give the broker your correct taxpayer iden-

Specific share identification.

of the FIFO method to figure the cost basis of

tification number (TIN). Generally, an individual

•

First-in first-out (FIFO).

shares sold, compared with the use of the sin-

will use his or her social security number as the

gle-category method to figure average basis

TIN.

(discussed

next).

Specific share identification. If you ade-

If you do not provide your TIN, your broker is

quately identify the shares you sold, you can use

required to withhold tax on the gross proceeds of

the adjusted basis of those particular shares to

a transaction. For 2010, the withholding rate is

Average Basis

28%. In addition, you may be penalized.

figure your gain or loss.

You can figure your gain or loss using an aver-

You will adequately identify your mutual fund

Identifying the Shares Sold

age basis only if you acquired the shares at

shares, even if you bought the shares in different

various times and prices, and you left the shares

lots at various prices and times, if you:

To figure your gain or loss when you dispose of

on deposit in an account handled by a custodian

1. Specify to your broker or other agent the

mutual fund shares, you need to determine

or agent who acquires or redeems those shares.

particular shares to be sold or transferred

which shares were sold and the basis of those

To figure average basis, you can use one of

at the time of the sale or transfer, and

shares. If your shares in a mutual fund were

the following methods.

Table 2. Mutual Fund Record

Acquired

Sold or redeemed

Adjusted

Number

Cost

Number

Mutual Fund

Adjustment to Basis Per Share

Basis Per

Date

Per

Date

Include share received from reinvestment of distributions.

Cost plus or minus adjustments.

Publication 564 (2009)

Page 6

Publication 564 - Mutual Fund Distributions - Internal Revenue Service - 2009 Page 6

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