Early redemption fees

Home Fairmark Forum Taxation of Investments Early redemption fees

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  • #1483
    thales
    Participant

    (I posted this earlier, but don’t know why it’s not showing)

    If a redemption of a mutual fund or ETF incurred an early redemption fee or short-term trading fee as per either the fund company or the brokerage, should that be included in the cost basis?

    I’ve see such fees in my account in different ways:

    a) The mutual fund early-redemption fee of $49 by brokerage (TD Ameritrade) was already deducted from the sales proceeds; i.e. if the proceeds was supposed to be $10,000, it’s shown as $9,951.

    b) The ETF short-term trading fee of $13.90 (for commission-free ETFs sold within 30 days) is, however, listed separately, E.g. if the proceeds was $10,000, then it’s shown as $10,000, then around 10:00 PM a fee of $13.90 appears in my account transaction list (deducted from the money market balance), with a note that it’s short term redemption fee for the specific ETF.

    It seems the “a)” has clearly included the fee in the cost basis. So my question mainly pertains to “b)”, because the fee is separately deducted from the money market balance. So how to fill out the form 8949? Should I write the sales proceeds as $9,986.1 (=10,000-12.90) in the above example?

    Thanks in advance.

    #1484
    Kaye Thomas
    Moderator

    Somehow your earlier posting of this question provoked a false positive from the normally quite excellent spam filtering software we installed with our new message board software. I can’t even guess why.

    You’ll receive a 1099-B or 1099-S (substitute for 1099-B) that should either add the fee to your basis or subtract it from your proceeds. In either case, follow the approach on the 1099 when filling out Form 8949. The IRS adds the following in the instructions for Form 8949:

    If there are any selling expenses or option premiums that aren’t reflected on the form or statement you received (by an adjustment to either the proceeds or basis shown), enter “E” in column (f) and the necessary adjustment in column (g).

    #1485
    thales
    Participant

    Thanks! (My (f) and (g) columns have always been blank, now I know when to use them)

    The previous post disappeared after 2-3 times of editing to add bold face (I clicked on “Edit”, added bold face, then submit, and repeated this maybe twice to add more bold face).

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