How is cost basis calculated using the single-category average cost method?
A. Under this method, the cost of all the fund share purchases is added and then divided by the total number of shares owned to determine the average per share cost of all the shares. When shares are redeemed the cost basis of the shares redeemed is multiplied using the average per share cost of the fund shares by the number of shares redeemed. Gain (or loss) from the sale of fund shares is then computed as the difference between the redemption amount and the determined average cost basis. • Add the total dollars of all shares currently owned. • To calculate the average basis per share divide the results of the first step by the number of the shares currently owned. • To calculate the basis of the shares being sold multiply the results of the second step by the number of the shares. Q. What are the other methods for calculating cost basis? A. The IRS permits three other methods of accounting for mutual fund cost basis: • FIFO. In this method the shares are sold in the order they were a
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- How is cost basis calculated using the single-category average cost method?
