Cost Basis Rules and Requirements
Regulations for Mutual Funds
Under Internal Revenue Services (“IRS”) regulations, mutual funds are required to report cost basis to the IRS. A sale or exchange of mutual fund shares may result in a capital gain or loss. The cost basis of the different shares you own is used to calculate the gain or loss of the shares sold. Cost basis is the original price paid for those shares. Any transaction that increases or decreases the number of shares in an account can affect cost basis.
The cost basis regulations treat mutual fund shares acquired before January 1, 2012 (the “effective date”) as non-covered shares. Mutual funds are not required to report cost basis to the IRS for shares purchased prior to the effective date. Shares acquired after the effective date are considered covered shares. Mutual funds are required to report the cost basis to both you and the IRS. When filing your tax return, you will be required to use the cost basis reported on IRS Form 1099-B for your covered shares.
What do I need to consider?
Each of the Midas Funds has chosen the Average Cost method as its default cost basis method. Under the Average Cost method, all of the share purchase costs are added together in an aggregate cost amount. The cost per share is then determined by dividing the aggregate cost amount by the total shares in the account. The basis of the shares redeemed is determined by multiplying the shares redeemed by the cost per share. Each Fund’s default cost basis reporting method will be used unless a Fund shareholder selects a different cost basis method. If you would prefer another reporting method, you can elect your preferred method by sending a letter of instruction with your preferred method to the address below.
|Regular Mail Delivery
Cincinnati, OH 45246-0707
225 Pictoria Drive, Suite 450
Cincinnati, OH 45246
If you have not proactively elected a cost basis method, you may retroactively elect a cost basis method before your first sale or exchange of shares. Whether you are changing from the Average Cost method to another cost basis method or changing to the Average Cost method from another cost basis method, your request must always be in writing. Once your shares have been sold or exchanged, the cost basis method applied at the time of the sale or exchange cannot be changed. You may only elect another method for futures sales or exchanges.
The cost basis method you choose will depend on your personal tax situation among other factors. Please consult your tax advisor regarding which method may be right for you.
Cost basis calculation methods include*:
|Cost Basis Methods
|The cost of shares, including reinvested dividends and capital gains distributions, divided by the number of shares held, is used to compute the average cost of each share.
This is the default cost basis method for each of the Midas Funds.
|Assets acquired first are sold first.
|Assets acquired last are sold first.
|Low Cost, First Out
|Lowest-cost shares are sold first.
|High Cost, First Out
|Highest-cost shares are sold first.
|Specific Lot Identification
|You select the specific shares you wish to sell or exchange at the time of each sale. The shares you select determine the cost basis and holding period.
*For additional information on IRS-approved methods for calculating the cost basis of your shares, see IRS Publication 550, Investment Income and Expenses, which can be found at www.irs.gov.
Cost basis reporting eligibility
Cost basis information will not be provided on the following:
- Fund shares purchased before January 1, 2012
- Shares that are held in individual retirement accounts (IRAs) and other retirement accounts
- Shares purchased through a brokerage firm
Should you have any questions, please contact us at 1-800-400-MIDAS (6432).