Help me understand these capital gains numbers

[disneysteve]

As of 12/31/24, we owned 2,583.876 shares of a mutual fund. According to the year-end statement, our total cost basis was $108,189.48. If I divide that out, it comes to a basis of $41.871/share.

No additional shares were purchased either directly or through reinvestment after that date (or before that date for at least 3 or 4 years).

On 2/20/25, I sold 430 shares at $87.76/share for a total of $37,736.80.

By the above figures, I thought my basis on those shares would be 430 x $41.871=$18,004.53.
The cost basis activity statement lists the basis on that transaction as $13,899.44 or $32.324/share.

Instead of my anticipated gain of $19,732.27 it's showing my gain is actually $23,837.36.

Why the discrepancy?

 

[RunningBum]

What cost basis did you specify for the sale? You are thinking average cost. They might have used FIFO. You probably don't want either. I would've chose SpecID, and chosen the shares with the highest basis.

 

[disneysteve]

What cost basis did you specify for the sale? You are thinking average cost. They might have used FIFO. You probably don't want either. I would've chose SpecID, and chosen the shares with the highest basis.

When I look at our account, it says the cost basis method set is average cost so I had every reason to think that's what they would use.

I understand that other options may have been more beneficial but I'm okay with using the average.

I guess I need to give them a call and find out for sure what happened here.

 

[RunningBum]

Yes, if they used a different method than what you had specified, insist that they fix it.

 

[Montecfo]

Yes, if they used a different method than what you had specified, insist that they fix it.

Yes.. I have experienced this before, the broker made a big mess of my cost basis per share

It was a huge job (many lots) but they fixed it and corrected 1099.

 

[PaunchyPirate]

As of 12/31/24, we owned 2,583.876 shares of a mutual fund. According to the year-end statement, our total cost basis was $108,189.48. If I divide that out, it comes to a basis of $41.871/share.

No additional shares were purchased either directly or through reinvestment after that date (or before that date for at least 3 or 4 years).

On 2/20/25, I sold 430 shares at $87.76/share for a total of $37,736.80.

By the above figures, I thought my basis on those shares would be 430 x $41.871=$18,004.53.
The cost basis activity statement lists the basis on that transaction as $13,899.44 or $32.324/share.

Instead of my anticipated gain of $19,732.27 it's showing my gain is actually $23,837.36.

Why the discrepancy?

Have you EVER sold any shares of that investment and then purchased more (via purchases or reinvested dividends)? If so even with average cost as your basis setting, not all lots will have the same share cost price. At the time of a sale in the past, any shares held at that time would have their cost fixed at the average cost up to that point. It would never change after that. Then if you bought more shares, a new average cost is calculated for all the new shares after that. If you sell again, the second set of shares will all get the fixed cost of the average of that set only. And so on. So if, over time, you sold 5 times, you would have 5 different average cost levels in your full investment.

Assuming the shares have risen over time the earliest shares would have a lower cost per share. And brokers usually sell first-in-first-out, so the shares with a lower cost would be sold first.

It’s important to know that FIFO and average cost can both be in play at the same time. One represents the lot selection method (FIFO) and the other represents determination of share costs.

 

[RunningBum]

if you have shares both pre-2012 (2011?) and post, they are in different blocks to be averaged. If you didn't specify which block to sell from they probably sold the older shares. But that's another thing you should find out from them in a call.

 

[disneysteve]

Have you EVER sold any shares of that investment and then purchased more (via purchases or reinvested dividends)? If so even with average cost as your basis setting, not all lots will have the same share cost price.

That may be the answer. I do think that 30 years ago we sold some shares when we bought our house. We continued investing in the fund for quite some time after that.

 

[disneysteve]

if you have shares both pre-2012 (2011?) and post, they are in different blocks to be averaged. If you didn't specify which block to sell from they probably sold the older shares. But that's another thing you should find out from them in a call.

We have been investing in that fund since 1992.