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I have a tax question about finding the average cost basis…

I have a tax question...
I have a tax question about finding the average cost basis on a mutual fund from which I sold shares in 2017.
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Answered in 1 minute by:
3/8/2018
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,610
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Hello!

My name is***** will assist you today.

What is your question about the average cost of mutual funds

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To calculate average basis:

  • Add up the cost of all the shares you own in the mutual fund.
  • Divide that result by the total number of shares you own. This gives you your average per share.
  • Multiply the average per share by the number of shares sold.
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Customer reply replied 4 months ago
I need you to walk me through this. I sold shares on five different occasions in 2017 from municipal income fund that I inherited in 2006. I received a history transcript from the investment firm with all the sales and reinvested income from the original date I got this fund. Now I'm lost.

Ok, so your cost basis is the date you inherited the funds in 2016

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How many shares did you initially inherit and at what approximate cost

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What is the ticker symbol of the fund?

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Customer reply replied 4 months ago
10,000.00 shares

From what you are stating you don't have to do average cost.

Your cost is the price of the fund on the date you inherited the fund

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Please let me know the:

  1. ticker symbol of the fund
  2. whether or not you reinvested all your dividends
  3. date you inherited the shares
  4. Sale dates
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Customer reply replied 4 months ago
MFS Municipal Bond Fund - A, however the fund changed its name after a few years to MMIDX I think

Municipal Income Fund Class A1.

Looks like it has appreciated about 60% since 2006.

If you would give me the information I asked above, I will be able to assist you.

  1. whether or not you reinvested all your dividends
  2. date you inherited the shares
  3. Sale dates
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Customer reply replied 4 months ago
MFS Municipal Income Fund A1 -0902 MMIDX

I am going to step away from my computer. Once I receive your information, I will be sure to follow up

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Customer reply replied 4 months ago
This asset was transfered to me on 3/20/06. Everything was reinvested. sales on five occasions in 2017.
Customer reply replied 4 months ago
Dates sold: 1/25/17, 8/16/17, 12/4/17, 12/18/17, & 12/22/17.

Ok, thank you.

I will have to do a little research and get back to you.

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Customer reply replied 4 months ago
Okay Thank you.
Customer reply replied 4 months ago
I'm sorry....actually to be exact, I acquired 10,328.2100 shares.

That's good to know because we are trying to get as close to exact as we can.

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The cost per share when you inherited the fund was approximately $8.20 a share.

If you received 10,328 shares at $8.20 you received approximately $84,689.60. This would be your cost basis

Over the 11 year span you received approximately $26,500 in dividends which adds to your cost basis.

Cost basis plus dividends that were previously taxed = $111,189.60 total cost basis

You should have the sale prices from the dates you gave me. I do also have prices from the date of your sale, but you should have specifically accurate records.

You will now have to determine how many shares you sold on sale dates along with the price the fund sold for.

The approximate cost basis is $111,189.60

Please let me know your follow up questions.

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Customer reply replied 4 months ago
Thank you very much for your terrific help. One more question though, would I use $111,189.60 as my cost basis permanently if there are future sales?

Your cost basis will go up as you receive more dividends that are reinvested.

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Customer reply replied 4 months ago
Right, of course. Thank you again

The price of the fund hasn't moved much and most of the gains have been through dividends, which are paid and taxed quarterly. --Of course except in the case where you have a fund that pays out dividends from a municipal bond fund.

Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,610
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
Verified
Chad EA, CDFA®, CFP® and 87 other Tax Specialists are ready to help you
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Customer reply replied 4 months ago
I would just continue to add the dividends reinvested to the total cost basis you came up with inthe future?

Yes, you do.

Dividends are generally taxable (municipal bond dividends are not always taxable) and added to your cost basis if you reinvest the dividends.

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Customer reply replied 4 months ago
Thank you. Much appreciated. Take care.
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