Selling Mutual Fund Shares

You can use either the separate lot method or the averaging method to determine your basis in mutual fund shares you sell. The following pages explain these alternatives and how to take advantage of them. Also explained are two special rules that can apply to sales of mutual fund shares: the sales load deferral rule, and a rule dealing with mutual fund shares held six months or less.

Overview of Cost Basis Methods
A bird’s eye view of how cost basis methods and disposition methods work together.

Changes in the Averaging Rules
The averaging rules changed dramatically when the cost basis regulations began to apply to mutual fund shares in 2012. This page briefly describes the key differences.

Electing a Cost Basis Method
Steps you have to take when choosing to use the separate lot method or the average basis method.

Using the Separate Lot Method
This page illustrates the steps required — and the difficulties involved — in maintaining records of your mutual fund investments using the separate lot method.

Using the Average Basis Method
Basis calculations are easier when using this method.

Changing Cost Basis Methods
Current rules are more liberal than the prior ones in permitting you to switch back and forth between methods.

Special Rule for Gift Shares
This rule matters only if you receive a gift of mutual fund shares with a date-of-gift value greater than the donor’s basis, and you’re using (or want to elect) the average basis method.

Double-Category Averaging Method
This method no longer exists, so the information here is of interest only if you used this method in the past.

Sales Load Deferral Rule
A special rule that applies if you avoid paying sales load on a new purchase due to having paid it on a previous purchase.

Shares Held Six Months or Less
Special rules can apply to loss on mutual fund shares held six months or less.