MelindaS1
Employee Tax Expert

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As Thomas said, make sure you identify the specific cost basis for each of the shares redeemed (800 in total, in this case) from the fund. That way, you can calculate the exact gain/or loss on the sale of each of these individual shares, in sum.

 

The IRS requires exact and consistent cost basis tracking to be used at the time of redemption for short term and long term capital gain reporting on the 8949. For example, let's say you purchased the 800 shares in total on 2 separate dates at two different price points, 300 one day, and 500 another day later in the year, leading to 2 sale lots:

[original cost of each share x 300] = Lot 1 basis

[original cost of each share x 500] = Lot 2 basis 

Lot 1 basis + Lot 2 basis = your total cost basis for the 800 shares sold in your partial redemption from the fund. This will lead to an adjusted gain/loss calculation, which factors in an exact basis number against the total sales proceeds. The tax cost basis on the shares sold will be identified and reported to you from your brokerage, using a method such as FIFO (First In First Out), specific identification, or Average Cost. You must use the same costing method in your individual tax return Form 8949 that your brokerage used when they reported the sale to you on your 1099.

 

You can learn more about the tax treatment that you have elected with your brokerage by checking out the 'Special Rules for Mutual Funds' section in IRS publication 550 Investment Income and Expenses. 

Note that original cost basis per share will be adjusted if additional factors apply such as as purchase commissions, fees, or organizational actions like stock split(s) or return of capital. Combined, these will be your adjusted basis per share - see more in IRS Pub. 550 above.

@br1634 

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