No. of Recommendations: 1
Is this due to the holding period needed for capital gains versus regular income tax treatment? Or is this due to not normally being able to re-invest dividends?

As Jenn points out, holding period and basis are completely separate issues. For both mutual funds and stocks, you can specify what shares you're selling, and that determines holding period. For stocks, your basis is for the specific shares sold. For mutual funds, you can go that way or elect to average the cost of all shares.

I suspect this is not deliberate on the part of Congress, but simply something that's never been addressed because, as you note, DRiPs are a relatively new phenomenon. A note to your representatives in Congress couldn't hurt.

I was under the impression that average cost could be used if all shares met the capital gains time requirement.

You're far from alone.

TMF ExRO
Phil Marti
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