<title>Select a cost basis method for mutual funds</title>
<category fLocale="cdn">investing</category>
<klink type="prcdr">How do I select a cost basis method for mutual funds?</klink>
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<tease>Why?</tease>
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<p>If you purchase shares of mutual funds over time, such as through regular paycheck deductions or automatic transfers, you may have a large number of buy transactions for the same investment. To simplify calculating your <glossary>cost basis</glossary> when reporting <glossary tNum="286960">capital gains</glossary> for income tax returns, you can use the average cost basis method.</p>
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<ol>
<li>On the <emph>Investing</emph> menu, click <emph>Portfolio</emph>.</li>
<li>Double-click the mutual fund investment (not the investment account) for which you want to set the cost basis.</li>
<li>Click <emph>More Investment Data</emph>, and then click <emph>See Details</emph>.</li>
<li>In the <emph>Cost basis</emph> box, click one of the following methods:</li>
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<tease><emph>Actual Cost Basis</emph></tease>
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<p>Money calculates your capital gains based on the actual purchase price you paid for the mutual fund.</p>
<p>Money calculates your capital gains based on the average purchase price of the mutual fund over time. If you select this method, you should use it for all future transactions for this mutual fund to ensure that your capital gains are accurately reported for tax purposes.</p>
<p>Money calculates an average cost for the long-term shares and assumes all shares are sold out of these long-term shares. For the remaining shares, the average cost for the short-term shares is used and the shares are marked as sold.</p>
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<p>If you hold the same mutual fund in multiple accounts, you'll need to use the same cost basis method for all of it.</p>
<li>Click <emph>Done</emph>.</li>
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<p variant="warn">Once you've reported a capital gain on your taxes for the mutual fund shares you sold using an average cost basis method, you should use the same method for future sales of these shares because of income tax regulations.</p>
<p>If you still decide to change the calculation method, Money assumes that you've used this method for all the sell transactions you've ever made for this mutual fund. This could yield incorrect results in your portfolio. If you want to change methods, you should delete the current mutual fund, create a new mutual fund, and then re-enter your buy and sell transactions using the new cost basis method.</p>
