Suppose you buy the fund with purchases starting in 2014. In April 2015 you sell some , but not all, shares. You continue purchases in 2015
continuing thru today. There were no other shares sold.
The sale in April 2015 was sold using average cost basis. In Jan 2018 you switched to specific lot ID. Does the change in basis apply only to shares purchased after that date or could it apply to shares purchase since the last sale.
The regs say that when you change from the average basis method, the basis of each share immediately after the change is the same as the basis immediately before the change. In other words, the change affects shares you acquire after the change, but does not affect shares you acquired before the change.
Thanks, Kaye. I thought I remembered seeing somewhere that if you had never sold anything, you could have changed from AVB to specific shares
and affected all of your shares. Did I misunderstand, or was there an incorrect myth in the early days of the basis change rules, or was this correct but you had to satisfy the “never sold anything” part? Or do
fund companies have some discretion?
These rules allow you to “revoke” an election to use the averaging method, or “change from” the averaging method. Once you’ve made a sale under the averaging method, you can no longer revoke it with retroactive effect. (There are other limitations on revoking as well.)