using average cost for a mutual fund is an acceptable method.
as a matter of fact there is a second acceptable method. shares are put in to 2 categories short term holding and long term holding. average cost is calculated for each. as time goes on short term shares are move to the long term category when their holding period becomes long term and the average cost for each category is recalculated. in practice , I never seen this
you just enter it on 8949 (really tt 1099B worksheet) and then box 1a = b cost basis not reported
2 s/b yes and 3 s/b no your calculated cost is entered on 7a
there is another issue because these shares were acquired by gift you also need to know donor's basis here's why
If the FMV when you received the gift was more the original cost basis, use the original cost basis when you sell. This is the most commonly-encountered situation.
If the FMV when you received the gift was less than the original basis, and you later sold the stock for:
More than the original basis, use the original basis.
More than the original basis but less than the FMV at the time of the gift, your selling price becomes the cost basis. You won't report a gain or loss in this situation.
Less than the FMV at the time of the gift, use the FMV at the time of the gift.
