When you sell a mutual fund that you have held many years what buy date do you use if you purchased the fund at various times?

Answer 1

Generally, mutual fund shares are purchased at varous times in various quantities and at varous prices.

There are two ways to figure their basis (cost or purchase price). One, average basis can be single-category method or double-category method. The single-category method uses the average basis of all shares owned at the time of each sale, no matter how long they've been owned. The double-category method divides all shares in an account at the time of sale into short term or long term categories. The average basis of the category becomes the basis of each share in the category.

Two, cost basis is used if you previously didn't use an average basis in the same mutual fund. Cost basis can be specific share identification through written confirmation from your broker/other agent. Or cost basis can be First-in First-out (FIFO).

For more information, go to www.irs.gov/formspubs for Publication 564 (Mutual Fund Distributions).