The Internal Revenue Service allows two methods for determining the cost basis for mutual fund shares. The method you use depends on whether you purchase all the shares on a single date for the same price per share, or purchase mutual fund shares on various dates and at different prices. You must have cost basis information to report the sale of your mutual fund shares to the IRS.
Single Acquisition Date
Determine the price you paid per mutual fund share when you acquired the shares. This information is found on your broker statement or sales summary documents.
Multiply the price per share by the number of mutual fund shares you purchased. The result is your total initial basis in the shares.
Add broker fees you pay to acquire, dispose of, or perform related broker transactions concerning your mutual funds. This information is also found on your broker statement.
Add your broker fee expenses to your initial basis. The result is your cost basis in your mutual funds.
Multiple Acquisition Dates
Calculate the total you paid for all your mutual fund shares. If you have held some shares for less than one year and some shares for longer than one year, separate your shares into these two categories before you calculate the total you paid for shares. Shares held less than one year are short-term assets and shares held longer than one year are long-term assets. Calculate totals for each of these asset groups separately.
Divide the cost total by the number of shares you own. The result is your average initial basis in the shares. If you separated shares into short-term and long-term categories, perform your average initial basis calculation separately for each asset class.
Add broker fees associated with transactions that affect your investment. Divide the result by the total number of shares you own, regardless of asset class. The result is your average broker expense per share.
Add your average initial cost basis per share to the average broker expense per share. The result is your average cost basis per mutual fund share.