Calculating COA on Mutual Fund merger

Forum|Forum|3 years ago
November 15, 2022
2 replies
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I have held a mutual fund since the 80's which I have added to and subtracted from over time. I used the ID method to sell shares back in the 90's when I sold a few shares, and I've added shares at various prices too. The fund merged with another fund in April, 2017. So all the shares I bought over the years were exchanged into the new fund. They exited the old fund at $59.82 per share, exchanged for $29.57 per share into the new fund.

I'd like to sell those shares now but I can't figure out how to calculate COA. I've seen some fomulas around for this, one of which says the COA is the FMV as of 1-31-2018. If that's so, my COA will be substantially lower than I expected. It seems too good to be true. In any case, I don't want to create a tax problem here. Any help would be appreciated.

Anonymous_

Level 15

@Mike9241

Mike9241

Level 15

if it was a tax-free merger, then your basis in the new mutual fund is the tax basis you had in the old fund + the tax basis of shares acquired after the merger.

They exited the old fund at $59.82 per share, exchanged for $29.57 per share into the new fund. This could be irrelevant. example say you had 100 shares of the old fund value at $5982.00 what you should have gotten is 202.30 shares of the new fund times $29.57= $5982.01 that .3 share might have been redeemed since many mergers provide no fractional shares will be issued.

if it was a fully taxable merger based on the example, the sale price back in 2017 would have been $5982 vs your cost in the old fund. the basis in the new fund would have been $5982

or it could have been a part taxable/tax-free merger

the best place to get more info is to contact the new fund. you should have gotten documentation before the merger which would have included a discussion of the tax consequences.. you may even be bale to find info on its website

Anonymous

Thanks for the response. There was no taxable event as a result of the merger. I think what you are saying is to calculate a cost basis prior to the merger, and again after the merger and add them together and subtract them from the sale proceeds? That was how I was planning to do it. What I really want to do is harvest CG here. I want to sell all of the shares and turn right around and buy them back. The overall sale will result in a profit, but a FEW of the shares are going to be more than the sale price. I don't want to sell all this and then find out the IRS considers it a wash-sale because not all shares were sold for a profit.

fanfare

Level 15

The last reinvested dividends were in 2019 so short term concerns are not an issue.

How about this: Sell only the shares that came from the old mutual fund. If the acquisition price to the new fund back in 2017 was $29.57, then any sale price above that should not trigger a wash-sale? Then I simply add up all the old purchase amounts to figure COA? Am I thinking correctly here?

"add up all the old purchase amounts to figure COA"

That is the method of "average cost"

@5131127