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Cost basis reporting at tax time

How we report your cost basis information

Due to regulatory changes that took effect beginning in tax year 2011, all sales of mutual fund shares, most ETFs, and stocks you made in 2013—whether covered or noncovered shares—will generate a Form 1099-B that shows cost basis information. However, only the cost basis information for sales of covered shares will be reported to the IRS.

Form 1099-B helps you report investment capital gains or losses on your tax return. The form lists sales, exchanges, and redemptions (including check writing activity) from most nonretirement mutual fund accounts. (For brokerage accounts, it reports sales, mergers, bond maturities, and aggregate profits or losses on regulated futures contracts.)

 

What's reported for my mutual fund sales?

To help understand how cost basis information is reported to you—or to both you and the IRS—here's a simple example:

Investor A Investor B
Date shares acquired June 1, 2008 January 20, 2012
Dates shares sold October 1, 2012 October 1, 2012
Type of shares Noncovered Covered
Cost basis reported to Investor A only Investor B and IRS

You remain responsible for reporting your cost basis information to the IRS on Form 8949 and Form 1040, Schedule D, for all shares sold, whether they're covered or noncovered. For noncovered shares, Vanguard only has average cost information so you're responsible for your recordkeeping if you used another method. For covered shares, it's important that the information you report in column (f) of Form 8949 matches what Vanguard reports to the IRS on Form 1099-B. Vanguard isn't required to make certain adjustments that are necessary for your tax return. For example, we don't adjust basis for wash sales when the purchase or sale is in another account or for taxes paid on gifts. Please see the IRS instructions for Schedule D and Form 8949.

What shares are covered under the regulations?

Vanguard reports cost basis information to the IRS only for "covered shares," meaning those acquired and subsequently sold after the regulations took effect.

For "noncovered shares"—those you acquired before the effective date of the regulations—Vanguard continues to report cost basis information only to you.

Holding type Covered shares Noncovered shares
Stocks
Certain ETFs*
Shares acquired on or after January 1, 2011. Generally, shares acquired before January 1, 2011.
Mutual funds**
Most ETFs***
DRIPs
Shares acquired on or after January 1, 2012. Generally, shares acquired before January 1, 2012.
Less complex bonds
Most options
Bonds and options acquired on or after January 1, 2014.Generally, bonds and options acquired before January 1, 2014.
More complex bonds
Certain options involving more complex bonds
Bonds and options acquired on or after January 1, 2016.Generally, bonds and options acquired before January 1, 2016.

*ETFs that are unit investment trusts (UITs) and taxed as regulated investment companies. If you're not sure whether this applies to your ETF, check with your issuer.

**Excluding money market funds.

***Certain ETFs, such as those that invest in commodities, aren't stocks; therefore, they're not covered under the regulations.

Generally, these are bonds or other debt obligations with fixed yield and maturity dates.

Generally, these are bonds or other debt obligations without fixed yield and maturity dates.

Asset transfers for bonds and options won't be reportable until 2015 for less complex bonds and most options, and 2017 for more complex bonds and certain related options. Therefore, any changes to tax forms won't go into effect until those years. We'll provide updates when the IRS publishes new forms and instructions.

Note: This information is not intended to be tax advice and cannot be used to avoid any tax penalties. We recommend that you consult a tax advisor.

 
 
 
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