I had some mutual funds that I had been DCA'ing into for years before my FIRE. They have appreciated quite a bit. I recently sold a portion of them and the year-to-date tax page is showing huge capital gains.
The amount of realized gains from these sales does not make sense to me when compared to the unrealized-gains shown for the remainder of these funds. I am going to call the company, but want to make sure I am thinking straight before I do.
The tax choice for the funds was "average share cost", which is the default choice. As I understand this, you add up the cost of all the shares and divide by the number of shares to get the average cost.
The description of the process says something about using the first in first out shares, but as part of the "average share cost" method.
Unfortunately, I did not save the unrealized cost basis page before I did the transaction.
For one of the funds, it currently shows the basis of the unrealized gain shares as $63.02 and shows "average share cost" as the basis choice.
However, I sold 30.60 shares for $196.08 per or $6000 and it is showing the basis for that transaction as $804.97 or $5195 gain on $6000.
Using the $63.02 basis per share, that should be $1928.41 not $804.97.
So . . .
My real question here is:
If I had a given number of shares with an average share cost of X before I made the sale transaction, should not the average share cost remain the same after I sell a portion of the shares?
That is, since I did not add any shares, the $63.02 average cost per share I see now should be the same as the cost per share before the sale, should it not?
The amount of realized gains from these sales does not make sense to me when compared to the unrealized-gains shown for the remainder of these funds. I am going to call the company, but want to make sure I am thinking straight before I do.
The tax choice for the funds was "average share cost", which is the default choice. As I understand this, you add up the cost of all the shares and divide by the number of shares to get the average cost.
The description of the process says something about using the first in first out shares, but as part of the "average share cost" method.
Unfortunately, I did not save the unrealized cost basis page before I did the transaction.
For one of the funds, it currently shows the basis of the unrealized gain shares as $63.02 and shows "average share cost" as the basis choice.
However, I sold 30.60 shares for $196.08 per or $6000 and it is showing the basis for that transaction as $804.97 or $5195 gain on $6000.
Using the $63.02 basis per share, that should be $1928.41 not $804.97.
So . . .
My real question here is:
If I had a given number of shares with an average share cost of X before I made the sale transaction, should not the average share cost remain the same after I sell a portion of the shares?
That is, since I did not add any shares, the $63.02 average cost per share I see now should be the same as the cost per share before the sale, should it not?