brokerage avg. basis vs. nondividend distribution

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Subject Author Date brokerage avg. basis vs. nondividend distribution Mark Bole 03-26-2009  Re: brokerage avg. basis vs. nondividend distribut... Alan 03-27-2009
Posted by Mark Bole on March 26, 2009, 9:35 pm Please log in for more thread options As a convenience, some brokers provide an average-cost basis calculation result for mutual fund shares sold. If there was also a non-dividend distribution during the year (reduces basis on remaining shares), is it common for the broker to take that into account for the year-end calculation? Or would the basis number calculated by the brokerage be further reduced by the non-dividend distribution (1099-DIV box 3) allocated by number of shares owned at the time of distribution? -Mark Bole -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Alan on March 27, 2009, 12:29 am Please log in for more thread options Mark Bole wrote: > As a convenience, some brokers provide an average-cost basis calculation > result for mutual fund shares sold. > > If there was also a non-dividend distribution during the year (reduces > basis on remaining shares), is it common for the broker to take that > into account for the year-end calculation? Or would the basis number > calculated by the brokerage be further reduced by the non-dividend > distribution (1099-DIV box 3) allocated by number of shares owned at the > time of distribution? > > -Mark Bole > The average cost basis provided by the investment company does not include non-dividend distributions. The taxpayer has to make the calculation to adjust basis for the distribution. Here is Fidelity's explanation. Return of capital A return of capital occurs when a fund's distributions exceed its earnings in a fiscal year. Distributions are not taxable when they exceed earnings, and are reported on Form 1099-DIV. The total basis of the position is reduced by the amount of the non-taxable distributions, but they do not affect the basis per share of existing shares. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted Nondividend Distribution February 14, 2009, 4:08 pm Excess of Distribution over Basis June 21, 2006, 10:55 pm Shares Distribution - Cost Basis March 9, 2010, 11:41 pm Capital Gain - Excess of Distribution over Basis June 29, 2006, 12:35 am Brokerage account October 14, 2008, 12:13 pm FIFO with two brokerage accts. July 12, 2007, 7:34 pm Non US Resident With Brokerage Account in US November 14, 2008, 10:34 pm Reconciling Brokerage 1099-B - is there such a thing as close enough? April 1, 2008, 11:39 am Mutual fund average basis rule - when can you revert to cost basis (actual cost of each share)? November 27, 2008, 8:23 pm 72T Distribution July 1, 2009, 10:42 pm