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I tried searching for this question but can't seem to get good result.

I'm sure it's there. The search engine on these boards sucks. Big time.

But no matter. Let's just answer it again.

Here is the situation.
Bought a mutual fund in a taxable account.


Got distribution and ended up with more shares.

This is what's tripping you up. This is really two transactions. First, you got a distribution of income from the mutual fund. That should have been on a 1099 for the year(s) of distribution. Second, you took that distribution money and bought more shares of the fund.

Repeat this part until you get it. Then the rest will be trivial.

Sold ALL my shares. How do I calculate the cost basis for tax?

Original purchase PLUS the subsequent purchases using the periodic distributions.

Example: Bought $2000 of XYZ mutual fund, which gave me 200 shares.


Got distribution, which were taxed in 2006.

There's vital information missing here. How much (in dollars) was the distribution?

Ended up with 225 shares and sold all of them in 2007...lets say for $2250.


How do I calculate my cost per share?

You don't care about the cost per share. At least not for tax purposes. You might need the sale price per share, because you'll need to allocate the sale price between each of your purchases.

There's some missing info, as noted above. Since this is an example, I'll provide it to complete the example.

Let's assume the 2006 distribution was $300. So you bought 25 shares with that $300.

Because we have to deal with both short and long term transactions, we have to split up your sale. You sold 225 shares, 200 of which were your original purchase and 25 of which were purchased with the distribution. The sale of the original 200 shares yielded proceeds of $2000, and the 25 shares were sold for $250.

Now match the sales up to the purchases. Original purchase was for $2000, so there's no gain or loss there. The purchase using the 2006 distribution was for $300, sold for $250, so that's a loss of $50.

There you go.

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