Cost Basis Details

IRS regulations require financial service companies to track and report cost basis for taxable accounts beginning on the effective dates below:

January 1, 2011-for stock securities purchased through a brokerage firm
January 1, 2012-for mutual fund purchases
January 1, 2014-for certain bond and option securities purchased through a brokerage firm

Mutual fund clients in taxable, non-money market accounts:
When you are ready to make or change your election, please log in and select the Choose your cost basis method link1 from the My Profile page. Or print and return the Cost Basis Election Form .

1 If the link does not appear, you do not have eligible accounts.

  • Cost Basis Overview
  • Timing of Purchase Matters
  • Understand Your Options
  • Other Considerations

What is Cost Basis?

Generally, cost basis is the purchase price of a security or share, including commissions and expenses, if applicable. You use your cost basis to determine if you have a capital gain or capital loss at the time you sell your shares. You must report capital gains and losses to the IRS for tax purposes.

When you sell or exchange shares, the transaction price is usually different from the original purchase price. If the selling price is greater than the purchase price, your profit is called a capital gain. If the selling price is less than the purchase price, your deficit is called a capital loss. You must report capital gains and losses to the IRS.

Investment Consultants at American Century Investments® are not licensed tax advisors and are unable to give tax advice. For that reason we encourage you to speak with your tax advisor to help you make the best choice for your situation.

When You Purchased the Shares Matters

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. As a courtesy, American Century Investments provides Average Cost information for non-covered shares when sold (if the data is available). No other methods are available.
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 corporate default if no method is elected

Purchase Date Determines if Shares Are Non-Covered or Covered:

Purchase Date Determines if Shares Are Non-Covered or Covered

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 your accounts.

The options you have depend on the type of shares you own. Review the options and the examples below to understand your choices.

Primary Cost Basis Calculation Methods

Hypothetical Examples

Below, we describe how cost basis is determined using three primary methods with the same purchase/sell dates for comparison. They are First In, First Out (FIFO), Average Cost and Specific Share ID (Select Lot).

Date of Transaction Transaction Amount Price Per Share # of Shares Total Shares
01/15/2012 Purchase by check $5,500.00 $11.00 500 500
12/15/2012 Reinvest dividend $240.00 $12.00 20 520
01/15/2013 Purchase by check $7,000.00 $14.00 500 1020
Total amount invested   $12,740.00     1020
05/01/2013 Sell $290.00 $14.50 20 1000

First In, First Out (FIFO)

Average Cost

Specific Share ID (Select Lot)

What happens when no method is selected?

Can't find your cost basis?

Giftrust®, Corporations and Transfers

IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

Giftrust is an irrevocable trust designed to be given as a long-term gift to someone other than yourself or your spouse and is not available for an IRA. The Giftrust investment is invested in the All Cap Growth Fund.

Brokerage Services are provided by American Century Brokerage, a division of American Century Investment Services, Inc., registered broker/dealer, member FINRA, SIPC.