The Average Cost Basis (Single Category Method)

Cost Basis Determines the Price you Paid for Shares

The average cost basis single category method (ACSC) is a method of calculating the average price paid for shares you hold in a mutual fund. Under this method, it is assumed that the oldest shares are sold first.

Mutual Funds Only

The Average Cost Basis Single Category Method is only permitted for shares held in mutual funds and cannot be used to calculate the cost basis of individual securities such as stocks and bonds.

Capital Gains and Losses

When you redeem shares of a mutual fund, the price at which you sell the shares will generally be different from the price at which you bought them. If you redeem at a higher price than the purchase price, you have a capital gain which must be reported to the IRS. The cost basis calculates the purchase price to use in order to determine whether or not you have a capital gain or loss.

Single Category Method

The Single Category Method determines the cost basis of your shares based on the average purchase price of all your shares, regardless of when you acquired them. To determine the purchase price of the shares you redeemed, simply multiply the number of shares redeemed by the average purchase price.

References

• Fidelity: Cost Basis
• American Century: Calculating Cost Basis