Generally, cost basis is the original amount you paid for shares in your Fund account, including the value of reinvested dividends and capital gains distributions. Upon a sale or exchange of Fund shares within a taxable account, you will realize a capital gain or loss, which is determined by comparing the sales price to the cost basis. The IRS requires mutual fund companies to report the cost basis of shares that are acquired after January 1, 2012.
|Cost Basis Methods Available for Covered Shares
|Average Cost (ACST)*
||You direct us to sell shares at an average acquisition price.
|First-In, First-Out (FIFO)
||You direct us to sell the oldest shares in your account first.
|Last-In, First-Out (LIFO)
||You direct us to sell the newest shares in your account first.
|High-Cost, First-Out (HIFO)
||You direct us to sell the highest cost shares in your account first.
|Low-Cost, First-Out (LOFO)
||You direct us to sell the lowest cost shares in your account first.
|Loss/Gain Utilization (LGUT)
||You direct us to evaluate gains and losses within the share lots in your account, and to sell lots with the largest losses first in a prescribed procession.
|Specific Lot Identification (SLID)
||You inform us upon each sale of which specific shares to redeem, along with a secondary method to be used as necessary.
There are several ways to elect a cost basis method for covered shares in an account.
- Complete an Online Form − Log in to Account Access, then navigate to "Change Cost Basis Method".
- Complete a Paper Form − Complete and mail a Cost Basis Election Form.
- Speak With a Client Services Representative − Call 1-800-621-3979 between the hours of 8 AM and 8 PM Eastern time.
Cost Basis Reporting
is cost basis reported for shares in my account?
Covered shares are Fund shares acquired after January 1, 2012. If you sell or exchange covered shares within a taxable Fund account, Dodge & Cox Funds will report to you the cost basis and holding period of the shares sold on Form 1099-B by late January of the following year. This information will also be reported to the IRS. You will be required by the IRS to use the cost basis information reported on Form 1099-B when completing your annual tax returns.
Non-covered shares are Fund shares acquired prior to January 1, 2012, or shares transferred into your account without corresponding cost basis information. If you sell or exchange non-covered shares within a taxable Fund account, and the Dodge & Cox Funds have Average Cost basis information for your shares, the cost basis and holding period information will be reported to you on your Form 1099-B. This information will not be reported to the IRS. If you have chosen a method other than the Average Cost method for your non-covered shares, you are responsible for keeping those cost records.
What happens if I do not make a
cost basis election?
If you did not elect a cost basis method prior to January 1, 2012, Dodge & Cox Funds’ default cost basis method of Average Cost has been applied to your taxable accounts.
How does Average Cost differ from other available cost basis methods?
The Average Cost basis accounting method is handled uniquely under the new IRS regulations as compared to other cost basis methods. If you elect or are defaulted to the Average Cost method for your covered shares, you may retroactively change to another method (revocation) at any time prior to the first redemption or transfer of shares from your account.
Following the first redemption or transfer of covered shares out of a Fund account, any change from the Average Cost method will be applied prospectively only to new shares acquired. Unlike other cost basis methods where changes can be conveyed via the phone, Average Cost basis elections and revocations must be made online or by submitting a paper Cost Basis Election Form.
I have always received Average Cost tax reporting from Dodge & Cox Funds. Will that continue?
If you sell or exchange non-covered shares within a taxable Fund account, and the Dodge & Cox Funds have Average Cost basis information for your shares, the cost basis and holding period information will be reported to you on Form 1099-B. If you sell or exchange covered shares within a taxable Fund account, the cost basis method used for tax reporting will be the method you elected or Average Cost if you did not make an election.
After making a cost basis method election, can I change my mind and choose another method?
You may always change a cost basis election prospectively for covered shares acquired from that date forward. If you elect or are defaulted to Average Cost, and there have not been any redemptions or transfers of covered shares from your account, you may ‘revoke’ your prior election and retroactively elect a different cost basis method for your covered shares. However, once you sell covered shares using the Average Cost method, you may not change your cost basis method on existing covered shares in your account. For all other cost basis methods, you may change your cost basis method on existing covered shares at any time.
Am I able to change the cost basis method used for a sale of shares after it has occurred?
Under current IRS regulations, you are not allowed to change the cost basis method used for a sale after it has occurred.
If I have both covered shares and non-covered shares in my account, which shares will be depleted first when I redeem shares?
If you sell shares in a taxable Fund account, Dodge & Cox Funds will deplete any non-covered shares first, unless you specifically identify other share lots you wish to sell.
What changes are anticipated for tax reporting and returns?
There are no anticipated changes
for tax year 2014.
The IRS implemented changes to Form 1099-B beginning with tax year 2012, adding new boxes for cost basis information.
The IRS also recently made changes to Schedule D (Form 1040) and introduced a new Form 8949 (Sales and Other Dispositions of Capital Assets) that is attached to Schedule D.
I still would like more information. What should I do?
We are happy to discuss your account options with you. However, as Dodge & Cox Funds are not in the business of providing tax or legal advice, we recommend seeking advice from an independent tax advisor.
Transfers and Multiple Accounts
Am I required to use the same cost basis method for all of my taxable accounts?
No. You may elect a different cost basis method for each of your regular taxable Fund accounts.
If I exchange shares of one Fund for another, will my cost basis election for covered shares be carried over to the new Fund account?
Yes. Dodge & Cox Funds will carry over your elected cost basis method for covered shares if you exchange into a new Fund account..
If I transfer covered shares to a financial intermediary, will my cost basis information transfer?
Yes. The law requires that Dodge & Cox Funds send your financial intermediary firm a cost basis statement if we have cost basis information for covered shares in your Fund account. Cost basis information for non-covered shares will not transfer.
If I donate shares as a gift or transfer, does cost basis transfer to the recipient?
Gifting or transferring shares can create a complicated tax issue. Under IRS regulations, gifted covered shares remain covered shares. Generally, a recipient of gifted shares accepts the ‘carryover’ original cost basis and holding period from the donor. However, in the case of shares gifted at a loss, and subsequently sold at a loss, the recipient is required to use the value of the shares on the date of the gift as the cost basis.
Special tax rules apply in the event of transfers of shares between spouses, between accounts with common ownership, or due to divorce. As Dodge & Cox Funds are not in the business of providing tax or legal advice, we recommend seeking advice from an independent tax advisor.
If I inherit shares from a decedent or estate, what cost basis information is used?
Inheriting shares can create a complicated tax issue. Usually, the cost basis is the value of the shares on the date of death, and the date of death is used as the acquisition date. However, an authorized representative of an estate can provide alternative instructions.
Special tax rules apply for certain joint account registrations, trusts, and partnerships. As Dodge & Cox Funds are not in the business of providing tax or legal advice, we recommend seeking advice from an independent tax advisor.
Dodge & Cox Funds are not in the business of providing tax or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
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