Question

ll of the following statements regarding the basis of mutual fund shares are true EXCEPT: Basis of mutual fund shares can be determined using the average cost method. Load is always allowed to be added to the basis of mutual fund shares. Basis of mutual fund shares can be determined in the same manner as for other securities. Taxpayers can specifically identify the shares they want to sell only if they have not previously used the average basis method to sell other shares of the same fund.

Answer 1

The following two statements are correct:

1. Basis of Mutual Fund shares can be determined using the average cost method.
2. Taxpayers can specifically identify the shares they want to sell only if they have not used previously used the average basis method to sell other sahres of the same fund.

Explanation: There are various ways to calculate cost basis such as FIFO, LIFO, average basis methods etc and once any of the method is followed, it should be followed consistently.

Note: In case of any clarification, please do comment. Thank you.