What the New Cost Basis Regulations Mean to You - Cost Basis Overview and Tax Reporting Timeline

Sep 19, 2026

Explains how new IRS cost basis reporting regulations affect investors and how cost basis is used to calculate capital gains or losses when securities are sold. Covers the reporting timeline tied to Form 1099-B beginning in 2011 and phased by security type through 2013-2014, and clarifies that IRAs and similar accounts are generally not impacted. Defines cost basis, outlines covered vs. non-covered shares by purchase date, and summarizes available mutual fund calculation methods including FIFO, Average Cost, and Specific Identification.

LanguageEnglish

CategoryInvoices

FormatPDF

Pages2

Reading Time1 min

AccessFree to download

The Basics of Cost Basis

Why Cost Basis Matters for Taxes

Cost Basis Reporting Timeline and Covered vs. Non-Covered Shares

Form 1099-B Phased Implementation

Covered vs. Non-Covered Shares

Cost Basis Calculation Methods for Mutual Funds

Cost Basis Election and Default Rules

FIFO, Specific Identification, and Average Cost

What Happens When No Method Is Selected

Default FIFO Approach

Documentation for Accurate Calculations

WHAT THE NEW COST BASIS REGULATIONS MEAN TO YOU Effective tax planning can help you save money and refine your investment strategy. That's why Integrity Viking Funds is committed to providing you with the latest information you need for your tax preparations. New regulations concerning the reporting of cost basis to the Internal Revenue Service (IRS) are on the horizon. The regulations stem from legislation, enacted in October 2008 as part of the Emergency Economic Stabilization Act, which requires the financial services industry to report their customers' cost basis to the IRS as part of Tax Form 1099-B, beginning in 2011 and phased through 2013 as follows, subject to any changes by the IRS. Accounts which do not generate Tax Form 1099-B, such as IRAs and other retirement plans, generally are not impacted by these changes. Type of Security Purchase Date Effective Tax Year 1099-B Mail Date Equities (Common, Preferred, and Foreign Stock) On or after 01-01-11 2011 2012 Mutual Funds/Dividend Reinvestment Plan (DRIP) Shares On or after 01-01-12 2012 2013 Options/Bonds/Other On or after 01-01-13 2013 2014 The Basics of Cost Basis and and asset gain Cost basis is used for income tax purposes and reflects the original purchase price or value of an asset, such as a security or mutual fund, including fees commissions, as adjusted for stock splits, return of capital, reinvested distributions, and other applicable adjustments. Cost basis also is known as tax basis is used to determine the capital gain or loss of the asset when it is sold or disposed. The capital gain or loss is the difference between the cost basis of the and the current market value of the asset when sold or disposed. Current Market Value- (Original Value + Fees + Commissions + Reinvested Distributions + Corporate Actions + Other Applicable Adjustments) = Gain or Loss Cost basis is the key element in determining the amount of tax you owe on securities you sell. A higher cost basis may result in a tax loss or minimize capital and the amount of tax owed. When You Purchased the Shares Matters Purchase date determines if shares are non-covered or covered. It's important to remember the mandatory tracking of cost basis only applies to shares purchased after the effective date. This includes shares acquired through dividends and transfers. For mutual funds, this means: Non-covered shares Shares purchased before 1/1/2012 Investment companies are not required to track and report these shares. Covered shares Shares purchased after 1/1/2012 As required by the new regulations, we will provide cost basis information for all clients using the method elected by the client or the default of FIFO if no method is elected. Cost Basis Calculation Methods your Mutual fund clients in taxable, non-money market accounts: When you are ready to make or change your election, please print and return the Cost Basis Election Form. Select the primary cost basis method that works best for your accounts. You may select a different method per account or one method that covers all of accounts. The options you have depend on the type of shares you own. Review the options and the examples below to understand your choices. Options | Mutual Fund Shares | Primary Cost Basis Calculation Methods | | --- | --- | | 􀀂 | First In, First Out (FIFO) -The first shares purchased are sold first. | | 􀀂 | Average Cost* -The shares in the account at the time of the sale are averaged to determine the cost. | | 􀀂 | Specific Share ID (also called Specific Lot) -The shares to be sold are specified by the client. | | 􀀂 | Last In, First Out-The most recently purchased shares are sold first. | | 􀀂 | Highest Cost-The shares with the highest cost are sold first. | | 􀀂 | Lowest Cost-The shares with the lowest cost are sold first. | *According to the IRS guidelines, only the single category applies after January 1, 2012. What Happens When No Method Is Selected? We will sele

FAQs

When do the new cost basis reporting regulations begin for IRS Form 1099-B?

The regulations are phased in starting with equities reported for Tax Year 2011 with mail dates in 2012, then mutual funds/DRIP shares for Tax Year 2012 with mail dates in 2013, and options/bonds/other for Tax Year 2013 with mail dates in 2014.

How is cost basis defined for tax purposes?

Cost basis reflects the original purchase price or value of an asset, adjusted for items such as fees and commissions, stock splits, return of capital, reinvested distributions, and other applicable adjustments. It is used to determine capital gain or loss upon sale or disposition.

What is the difference between covered and non-covered mutual fund shares?

Non-covered shares are purchased before 1/1/2012 and are generally not required to track and report under the mandatory rules. Covered shares are purchased after 1/1/2012, and the new regulations require cost basis information for clients.

Sep 19, 2026

Upload by Guten tag