Holding period for mutual fund shares

[skip-whitehurst]

My wife purchased shares in a mutual fund in 2003 for a non-retirement account. The fund is described as an "income-oriented balanced fund [with] exposure to stocks and investment-grade bonds", if that matters. The dividends have been used to purchase additional shares in the same fund since then.

She recently disposed of some shares that are in the "non-covered" category. My investigation of the rules says that mutual fund shares acquired after 2011 are "covered", and those acquired before 2012 are "non-covered". Her aggregate per-share cost basis for that category is known, but what should we use for the acquisition date? Since everything in that group had been purchased more than seven years before they were disposed of, should we just use the date the last non-covered shares were purchased (Dec 2011), or some other date? 

[RobertG]

You can use 'various' for the dates purchased. 

As long as you classify them as long term, they will be treated as long term capital gains.

For tax-reporting purposes, the difference between covered and non-covered shares is this: For covered shares, your broker is required to report cost basis to both you and the IRS. For non-covered shares, the cost basis reporting not sent to the IRS.  You have to calculate the basis.

If the basis is not reported on the 1099-B, they should be classified as 'long term non-covered'.

[fanfare]

if your fund is giving you average cost basis that's the simplest way.

if you are planning to sell more of that fund, eventually you will get to the 2011 and later reinvested dividends and they will become covered transactions.

[skip-whitehurst]

Thanks. Is listing 'Various' any better than just using the date of the latest acquisition instead?

[fanfare]

the default is FIFO, that is you must use the date of the earliest acquisition sold.

Use "various" until you hit the one-year holding period.