Publication 564 - Mutual Fund Distributions - Internal Revenue Service

Table 3. Example of How To Figure Basis of Shares Sold

your shares was $4,800 ($1,000 + $1,200 +

$2,600). On May 11, 2009, you sold 150 shares.

The basis of the shares you sold is $2,400 ($16

This is an example showing two different ways to figure basis. It compares the cost basis using

per share), figured as follows.

the FIFO method with the average basis using the single-category method.

Date

Action

Share Price

No. of Shares

Total Shares

Enter the total adjusted basis of all

Owned

the shares you owned in the fund

just before the sale. (If you made

2/6/08

Invest $4,000

$25

160

an earlier sale of shares in this

fund, add the adjusted basis of any

8/7/08

Invest $4,800

$20

240

400

shares you still owned after the

last sale and the adjusted basis of

12/18/08

Reinvest $300

any shares you acquired after that

dividend

$30

410

sale.) . . . . . . . . . . . . . . . . . . . . $4,800

10/1/09

Sell 210 shares

$32

210

200

Enter the total number of shares

for $6,720

you owned in the fund just before

the sale . . . . . . . . . . . . . . . . . .

300

Divide the amount on line 1 by the

COST BASIS

To figure the basis of the 210 shares sold on 10/1/09, use the share

amount on line 2. This is your

(FIFO)

price of the first 210 shares you bought, namely the 160 shares you

average basis per share . . . . . . $

purchased on 2/6/08 and 50 of those purchased on 8/7/08.

$4,000 (cost of 160 shares on 2/6/08)

Enter the number of shares you

sold . . . . . . . . . . . . . . . . . . . . .

150

+ $1,000 (cost of 50 shares on 8/7/08)

Basis = $5,000

Multiply the amount on line 3 by

the amount on line 4. This is the

basis of the shares you sold . . . $2,400

AVERAGE BASIS

To figure the basis of the 210 shares sold on 10/1/09, use the

(single-category)

average basis of all 410 shares owned on 10/1/09.

Remaining shares. The average basis of

$9,100 (cost of 410 shares)

the shares you still hold after a sale of some of

÷ 410 (number of shares)

your shares is the same as the average basis of

$22.20 (average basis per share)

the shares sold. The next time you make a sale,

your average basis will still be the same, unless

you have acquired additional shares (or have

$22.20

made a subsequent adjustment to basis).

× 210

Basis = $4,662

Example 2. The facts are the same as in

Example

1, except that you sold an additional 50

shares on December 17, 2009. You do not need

•

Single-category method.

Example. You bought 400 shares in the

to recompute the average basis of the 150

LJO Mutual Fund: 200 shares on May 15, 2008,

•

shares you owned at that time because you

Double-category method.

and 200 shares on May 14, 2009. On November

acquired or sold no shares, and had no other

10, 2009, you sold 300 shares. The basis of all

adjustments to basis, since the last sale. Your

Once you elect to use an average basis, you

300 shares sold is the same, but you held 200

basis is the $16 per share figured earlier.

must continue to use it for all accounts in the

shares for more than 1 year, so your gain or loss

same fund. (You must also continue to use the

on those shares is long term. You held 100

Example 3. The facts are the same as in

same method.) However, you may use the cost

shares for 1 year or less, so your gain or loss on

Example

1, except that you bought an additional

basis (or a different method of figuring the aver-

those shares is short term.

150 shares at $14 a share on September 17,

age basis) for shares in other funds, even those

How to figure the basis of shares sold. To

2009, and then sold 50 shares on December 18,

within the same family of funds.

figure the basis of shares you sell, use the steps

2009. The total adjusted basis of all the shares

in the following worksheet.

Example. You own two accounts that hold

you owned just before the sale is $4,500, figured

as follows.

shares of the income fund issued by Company

Enter the total adjusted basis of all

A. You also own 100 shares of the growth fund

the shares you owned in the fund

Basis of remaining shares ($16 x

issued by Company A. If you elect to use aver-

just before the sale. (If you made

150) . . . . . . . . . . . . . . . . . . .

$2,400

age basis for the first account of the income

an earlier sale of shares in this

Cost of shares acquired 9/17/09

fund, you must use average basis for the second

fund, add the adjusted basis of any

($14 x 150) . . . . . . . . . . . . . . .

$2,100

account. However, you may use cost basis for

shares you still owned after the last

Total adjusted basis of all shares

the growth fund.

sale and the adjusted basis of any

owned ($2,400 + $2,100) . . . . .

$4,500

shares you acquired after that

You may be able to find the average

sale.) . . . . . . . . . . . . . . . . . . . . $

TIP

basis of your shares from information

The basis of the shares sold is $750 ($15 a

Enter the total number of shares

provided by the fund.

share), figured as follows.

you owned in the fund just before

the sale . . . . . . . . . . . . . . . . . .

Enter the total adjusted basis of all

Single-category method. Under the sin-

the shares you owned in the fund

gle-category method, you find the average basis

Divide the amount on line 1 by the

just before the sale. (If you made

of all shares owned at the time of each disposi-

amount on line 2. This is your

an earlier sale of shares in this

average basis per share . . . . . . $

tion, regardless of how long you owned them.

fund, add the adjusted basis of any

Include shares acquired with reinvested divi-

Enter the number of shares you

shares you still owned after the

dends or capital gain distributions.

sold . . . . . . . . . . . . . . . . . . . . .

last sale and the adjusted basis of

Table 3 illustrates the use of the sin-

any shares you acquired after that

Multiply the amount on line 3 by the

gle-category method to figure the average basis

sale.) . . . . . . . . . . . . . . . . . . . . $4,500

amount on line 4. This is the basis

of shares sold, compared with the use of the

of the shares you sold . . . . . . . $

Enter the total number of shares

FIFO method to figure cost basis

(discussed

you owned in the fund just before

earlier).

Example 1. You bought 300 shares in the

the sale . . . . . . . . . . . . . . . . . .

300

Even though you include all unsold shares of

LJP Mutual Fund: 100 shares in 2006 for $1,000

a fund in a single category to compute average

Divide the amount on line 1 by the

($10 per share); 100 shares in 2007 for $1,200

amount on line 2. This is your

basis, you may have both short-term and

($12 per share); and 100 shares in 2008 for

average basis per share . . . . . . $

long-term gains or losses when you sell these

$2,600 ($26 per share). Thus, the total cost of

shares. To determine your holding period, the

shares disposed of are considered to be those

acquired first.

Publication 564 (2009)

Page 7

Publication 564 - Mutual Fund Distributions - Internal Revenue Service - 2009 Page 7

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