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Cost Basis

Cost basis is the original monetary amount paid for shares of a security. When you sell or exchange shares of mutual funds or other securities, you may have a capital gain or loss that must be reported to the IRS. To calculate the gains or losses from shares sold, you must know the cost of the different shares that you own. If you previously sold shares of the same security, the cost basis of the shares you still own depends on the method that you use to determine cost basis.

Cost Basis Basics

Entering and Editing Cost Basis


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What transactions can affect cost basis?

Any transaction that increases or decreases the number of shares in a position can affect cost basis. When you buy or sell shares of a security, the cost basis of your position in that security will change. Depending on the type of security, factors other than the original purchase price of a security can have an impact on cost basis. Events such as splits, spin-offs, and liquidations can all affect cost basis. Consider consulting a tax advisor with your specific questions about calculating gains and losses in your individual tax situation.

Other transactions which can affect the cost basis of your holdings include the following:

What is Mutual fund bifurcation?

A bifurcated mutual fund position using average cost has two sub-positions composed of covered and noncovered tax lots. Each of these sub-positions will maintain its own calculated average cost.

What are the reasons for unknown cost basis?

There are many reasons why cost basis may not be known for some or all of the shares in any position in your brokerage account or mutual fund account. Sometimes, unknown cost basis is simply the result of an account pre-dating cost basis records. Other times, unknown cost basis results from a transfer of shares from one account or account type to another.

Some of the most common reasons for unknown cost basis are:

For information on how to manually enter cost basis when unknown, see Can I enter or edit the cost basis information for a security?

What cost basis methods are approved by the IRS?

The cost basis methods approved by the IRS include:

Can I use cost basis information provided by Fidelity to make investment or tax decisions?

Cost basis (and related gain and loss) information made available to you is not intended, and should not be construed as legal or tax advice. Fidelity makes no warranties with respect to, and specifically disclaims any potential liability resulting from, tax positions which you might take in reliance on such information. You should consult your tax advisor for additional information which may be relevant to your individual tax situation.

Why is there a dotted line beneath some of the values?

A dotted line beneath some of the values tells you the values were calculated using a Factor. If you hold your mouse over the dotted line, a tool tip will appear that describes the calculation in detail.

For certain fixed income products that pay principal, such as a mortgage-backed security, a Factor is used to determine the current face value of the position, as the face value of the position changes over time. Because the product pays principal over its lifetime, most often, the face value of the product deteriorates over time, and therefore, typically, the Factor is less than one. For example, to determine the Most Recent Value of a fixed income product with a Factor, Price is multiplied by Quantity and Factor, and that number is divided by 100.

For factored securities, as well as all fixed income securities, both the Most Recent Value and Previous value use the price determined as of the previous day's close of business valuation. If a portion or all of the position is sold during the day, although the Value fields will reflect the intraday change in Quantity, the Price and Factor of the security will continue to be based on the previous day's close of business valuation.


Can I enter or edit the cost basis information for a security?

If the cost basis for a security is unknown, click Enter Cost in the Cost Basis column to display the Eligible Lots page. If you previously entered a cost basis for a security, you can edit the cost basis by clicking the dollar figure in the Cost Basis column. You cannot update the basis for shares if the cost basis has been provided by Fidelity.

Note: Cost basis updates submitted today are pending and will appear on the next business day. The most recent cost basis information that you entered overrides any previously provided cost basis for the selected lots.

What does the Eligible Lots page show?

The Eligible Lots page identifies the shares of a position for which you may provide or update cost basis information. The total number of shares that are eligible for updating are shown in the Lot Quantity field.

How do I enter or edit the cost basis information for an eligible lot?

On the Eligible Lots page, click Update Basis for the lot to display the Update Basis page. Before you enter or edit cost basis information, gather background documents such as trade confirmations and account statements. You may also want to review the details of your Consolidated Form 1099.

For each lot, enter the date acquired, the quantity, and the cost basis. If you purchased your shares over multiple dates or at different prices, you may split the tax lot into multiple lots (up to 100) by clicking Add Row. For example, if you have 200 shares with unknown cost basis. representing two separate purchases of 100 shares each, you can provide the cost basis for the first 100 shares, then click Add Row to provide the cost basis for the remaining 100 shares. Each time you add a row, review the amount in the Quantity Remaining field to see how many shares still have unknown cost basis.

Note: If you're updating cost basis for an average cost position, you must provide information for all the unknown shares. If you are adding information for a FIFO position, you can provide the cost basis for only a portion of the shares and leave some as unknown.

How do I submit updated cost basis information to Fidelity?

When you're ready, click Preview Updates. Review the information on the Preview Update page carefully. If the information is correct, click Submit to submit your updates to Fidelity and to view the Update Basis Confirmation page. Cost basis information will be updated on the next business day.


How are distributions calculated and posted to an account?

Mutual funds that accrue income daily, such as many bond and money market funds, pay a monthly dividend equal to the sum of each day's share balance multiplied by the fund's daily milrate. Therefore, the distribution amount you receive may not equal the monthly milrate sum multiplied by your month end balance. Changes in your fund's share balance throughout the month will affect the distribution you receive at the end of the month.

Mutual funds that do not accrue income daily, such as many equity funds, may declare a distribution on a specified date (often monthly or quarterly). The amount of distribution you receive in this instance is equal to the number of shares you hold on the record date multiplied by the per share distribution amount.

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