Are shares acquired with reinvested dividends given cost basis equal to the reinvested amount (i.e., specific identification) or are those shares deemed to have average cost basis (particularly if the fund complex provides average cost information to its shareholders)?
A. The instructions for computing after-tax return provide that a fund should separately track the basis of shares acquired through the initial investment and each subsequent purchase through reinvested distributions. In determining the basis for a reinvested distribution, a fund should include the distribution net of taxes assumed paid from the distribution.13 Thus, all shares have a cost basis equal to the amount invested (on the date of initial investment or the date of reinvestment), as if the shareholder uses the specific identification method of determining cost basis. For example, if a dividend of $80 (net of taxes) is reinvested, the cost basis of the shares acquired is $80.
Related Questions
- Are shares acquired with reinvested dividends given cost basis equal to the reinvested amount (i.e., specific identification) or are those shares deemed to have average cost basis (particularly if the fund complex provides average cost information to its shareholders)?
- During 2010, I sold fund shares inherited from my parents. Will cost basis and gain/loss information from this sale be shown on my 2010 Average Cost Accounting Statement?
- Why is cost basis and other share detail not available for shares held in a common stock account at BNY Mellon?
