Tax & EvaluationQuestion 98 of 110
Which cost basis method applies to mutual fund shares if the shareholder makes no election?
a.Average cost, single category
b.Specific identification of the highest-cost shares
c.First in, first out
d.Last in, first out
Explanation
Absent an election, the IRS default for securities including mutual fund shares is first in, first out, which sells the oldest shares first. Shareholders may instead identify specific shares at the time of sale or, for fund shares, elect an average cost method through the fund. LIFO is not an available basis method for these shares.
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