Skip to main content

Looking to Learn More? Sign up for our Investing Insights newsletter. Subscribe

Thanks for Signing Up!

Be sure to check your inbox for the Investing Insights newsletter to get the latest news and insights from Thrivent Mutual Funds.

Well that's unexpected - your subscription request was not submitted. Please try again.

Great news - you're on the list!

Looks like you're already on our mailing list. Be sure to check your inbox for the Investing Insights newsletter to get the latest news and insights from Thrivent Mutual Funds.

Cost Basis Reporting

What is cost basis?

Simply put, cost basis is the original price of an investment and is used to calculate capital gains or losses for tax purposes. It includes shares purchased by check, Automated Clearing House (ACH) or wire, exchanges into an account, and reinvested dividends and capital gains. Please note that cost basis is not a substitute for performance information for an investment.

 

How is cost basis used to calculate the gains and losses shown on my Form 1099-B?

The gain or loss shown on your Form 1099-B is the difference between the amount for which the shares were sold and the cost basis of your shares using the elected accounting method.

 

Why is cost basis reporting required?

The requirement is part of the Emergency Economic Stabilization Act that was intended to improve compliance with tax laws and raise revenues to fund the Troubled Asset Relief Program (TARP), which is sponsored by the U.S. Department of the Treasury. Specifically, the legislation requires an expansion of the current reporting on IRS Form 1099-B. The requirement impacts equity securities, mutual funds and debt securities purchased on or after specified dates. For mutual funds, cost basis information is required for shares purchased on or after January 1, 2012. It does not affect annuities, life insurance, money market fund accounts with a stable net asset value (NAV), retirement accounts or Coverdell Education Savings Accounts.

 

What is the difference between long-term and short-term holding periods?

The holding period is used to determine the tax rate that applies to any capital gains from the sale of shares.

  • Long-term periods apply to shares owned more than one year. Lower capital gain tax rates apply to long-term capital gains.
  • Short-term periods apply to shares owned one year or less. Ordinary income tax rates apply to short-term capital gains.

 

How does the holding period of the shares I sold affect my taxes?

Holding periods affect the rate at which you are taxed. The holding period is based on the length of time you owned the shares you sold.

  • Short-term (one year or less): Gains are taxed at your ordinary income tax rate.
  • Long-term (more than one year): Gains are taxed at the applicable capital gains rate depending on your tax bracket.

 

What is the difference between a covered and noncovered share?

Covered shares are shares purchased on or after Jan. 1, 2012. We are required to track and report cost basis information to you and the IRS for these shares.

Noncovered shares are shares purchased prior to Jan. 1, 2012, or are shares purchased after the effective date for which cost basis information is unavailable.

 

What types of investments are affected by the cost basis reporting requirement?

Cost basis regulations impact equity securities, mutual funds and debt securities purchased on or after the effective dates listed in the previous question. It does not affect annuities, life insurance, money market fund accounts with a stable net asset value (NAV), retirement accounts or Coverdell Education Savings Accounts.

For cost basis purposes, shares will be classified as "covered" or "noncovered".

  • "Covered shares" are shares purchased on or after the effective date for which cost basis information is provided to you by the broker/mutual fund company.
  • "Noncovered shares" include shares purchased before the effective date and shares purchased on or after the effective date for which cost basis information is unavailable. The information may be unavailable because the broker/mutual fund company does not have sufficient information to track the cost basis. Cost basis information on noncovered shares is not required to be provided but may still be provided to you (but not the IRS) for your information. You can choose to use cost basis information provided on noncovered shares or calculate your cost basis on your own.

 

My mutual fund account was established prior to the effective date (January 1, 2012) for cost basis reporting regulations. Will I receive cost basis information on shares in this account?

It depends. For cost basis purposes, shares will be classified as "covered" or "noncovered."

  • "Covered shares" are shares purchased on or after the effective date for which cost basis information is provided to you by the broker/mutual fund company.
  • "Noncovered shares" include shares purchased before the effective date and shares purchased on or after the effective date for which cost basis information is unavailable. The information may be unavailable because the broker/mutual fund company does not have sufficient information to track the cost basis. Cost basis information on noncovered shares is not required to be provided but may still be provided to you (but not the IRS) for your information. You can choose to use cost basis information provided on noncovered shares or calculate your cost basis on your own.

 

Am I required to use the cost basis information provided by Thrivent Mutual Funds on my tax returns?

You (and the IRS) will receive cost basis information for all of your covered shares on Form 1099-B. When available, you may receive cost basis information, either on Form 1099-B or a separate cost basis statement, for noncovered shares purchased prior to the effective date. Cost basis information on noncovered shares will not be provided to the IRS. You should always use Form 1099-B to complete your tax return for covered shares. Information from other sources can change due to cost basis adjustments that may occur from other activity in your account. As stated previously, you can choose to use cost basis information provided on noncovered shares or calculate your cost basis on your own.

 

What cost basis methods are available for Thrivent Mutual Fund accounts?

You may use these methods for Thrivent Mutual Fund accounts:

  • Average Cost—Uses the average cost of the shares as the basis for redemptions to calculate capital gains and losses. To determine the holding period for the shares, Average Cost uses the First-In, First- Out method. The Average Cost method is only allowed for mutual funds.
  • First-In, First-Out (FIFO)—Shares acquired first in the account are the first shares depleted to determine cost basis.
  • Last-In, First-Out (LIFO)—Shares acquired last in the account are the first shares depleted to determine cost basis.
  • High Cost—Shares acquired with the highest cost per share in the account are the first shares depleted to determine cost basis.
  • Low Cost—Shares acquired with the lowest cost per share in the account are the first shares depleted to determine cost basis.
  • Loss/Gain Utilization—Depletes lots with losses before lots with gains, consistent with the objective of minimizing taxes. For lots with a loss, short-term loss lots will be redeemed ahead of long-term loss lots. For gains, long-term gain lots will be redeemed before lots with short-term gains since long-term capital gains rates are lower than short-term.
  • Specific Lot Identification—You select specific shares to be sold in an account at the time shares are sold to determine cost basis.

You do not need to use the same method on all mutual funds. However, you must use the same method for all accounts in the same mutual fund. Once you have elected a method for determining your gains and losses, please contact your tax advisor if you wish to change that method.

 

What cost basis information is available for noncovered shares in my Thrivent Mutual Funds account?

Thrivent Mutual Funds can only provide average cost information on noncovered shares. If you are using the average cost method for covered shares, average cost information will be provided to you for your noncovered shares when available. If you choose a method other than average cost for your covered shares, you can still choose to receive average cost information on your noncovered shares. In this case, all noncovered shares will be redeemed first using average cost. Once all noncovered shares are depleted, covered shares will be depleted using the elected cost basis method.

 

Why isn’t average cost basis information available on my noncovered shares?

There are three reasons why average cost basis information may not be available on your account:

  • You had shares transferred into your account due to an ownership change, such as a gift or inheritance.
  • Your account was established prior to the date the Fund began calculating cost basis information.
  • You have an IRA, Coverdell, 403(b), qualified plan or a Thrivent Money Market Fund account, which is excluded from tracking cost basis because these redemptions are not reported on Form 1099-B.

If your account does not have cost basis information available, and you are using the Average Cost Accounting method to report your gains and losses, you may provide us with cost basis information to add to your account. We suggest you consult with your tax advisor to determine your cost basis as of Jan. 28, 2010. We can provide a copy of the history for an account if requested by the account owner or registered representative. Once your cost basis has been determined, contact Customer Support at 800-847-4836 for instructions on how to add average cost for the noncovered shares to your account.

 

How does average cost work?

The average cost of shares purchased up to the date of the sale is used to determine the capital gain or loss. The total cost basis of all shares owned is divided by the total number of shares in the account to determine the average cost per share. For example:

$1000 (total cost basis of all shared owned) / 100 (total number of shares owned) = $10 (average cost per share)

 

Can I change my cost basis election?

Yes, you may change the cost basis method used on your investment at any time. Once you change your method, it will be used on any sales of shares that occur after the change. You cannot change the method used on a sale that has already occurred. If you are changing from the average cost method and a redemption or sale of covered shares has already been processed on the account, the existing covered shares in your account are assigned the average cost basis. Future shares purchased after the change will retain their original purchase price as the cost basis. If you change from average cost and have not yet redeemed or sold shares from your account, all covered shares will retain their original purchase price for cost basis purposes.

 

How can I change my cost basis election?

You can change your election online by logging into your account, in writing and, in some cases, over the phone. Contact Customer Support at 800-847-4836 for assistance.

 

Can I use a different cost basis method for a specific transaction?

For Thrivent Mutual Fund accounts, if you are using a method other than average cost, you can override the cost basis method at the time of the transaction and use a different method.

 

Will cost basis information always be available?

Cost basis information will be provided most of the time. Certain situations exist, however, where it may not be available. If you have cost basis information available, you can provide it to us so we can add and track it going forward.

 

What if I own shares of the same issuer in multiple accounts?

Thrivent Mutual Funds will provide you with separate cost basis information for the covered shares in each separate account. It is the shareholder's responsibility to make appropriate cost basis adjustments due to activity for the same security held in multiple accounts. For more information, please see IRS publications 550 – Investment Income and Expenses (IRS Form 564 was integrated in 2011) and 551 – Basis of Assets, or consult your tax advisor.

 

Can my Thrivent Financial representative help me determine the best election method?

No. Thrivent Financial representatives can explain the requirement and the various election methods, but they are not allowed to recommend a specific method. Because this falls into the area of providing tax advice, you should consult your tax advisor for help with selecting your election method.

 

I am receiving inherited shares or gifted shares into my account. Will these shares have cost basis information?

It depends. If the shares were originally purchased by the owner before the effective date for cost basis reporting, these shares are noncovered shares. If cost basis information is available, it will be provided to you only (and not the IRS); you can choose if you want to use this information on your tax return. If the shares were purchased on or after the effective date, cost basis information will be available for these shares. Please note that you are not allowed to use the average cost method on gifted shares unless you agree to use the fair market value of the shares at the time of the gift as the cost basis for those shares.


At Thrivent Mutual Funds, we recommend you consult your tax advisor to make sure you’re getting the most out of your investments. Thrivent Mutual Funds and their representatives cannot provide legal or tax advice.