If I previously sold shares of a mutual fund and reported the gains or losses using the FIFO method, can I switch to the average cost method?
Yes, you can. The only requirement for using an average basis is that you acquired the shares at various times and prices, and you left the shares on deposit in an account handled by a custodian or agent who acquires or redeems those shares. The average-basis method, once adopted, must be disclosed on your tax return and the method cannot be changed back without permission from the Commissioner of the Internal Revenue Service. Before computing the basis of shares sold using an average basis, ensure that you have reduced your previous total basis by the cost of the shares accounted for using the FIFO method.
Related Questions
- I have used the FIFO method to determine the cost basis for a sale of a portion of a mutual fund holding. Must I continue to use this method for all future sales of this fund?
- If I use an average basis method for computing basis of mutual fund shares upon sale, how do I determine the holding period for those shares?
- After the first partial sale of mutual fund shares, are the sold shares no longer used when updating the average cost basis for future sales?
