Cost basis requirements

 

What is cost basis?

To determine whether you have a capital gain or loss on shares you sold or exchanged, you must establish your cost basis. Cost basis generally is the price you paid for your shares, including any sales charges. Your cost basis may not be the same for all shares because the price may have varied if you made purchases at different times. Shares you acquired through reinvested dividends or capital gains are considered separate purchases and should be included in your calculations. The difference between the amount you received when you sold or redeemed your shares and your cost basis represents your gain or loss. In this way, your cost basis will help you determine how much you owe in taxes or can claim as a deduction.

 

What is reported?

As of Jan. 1, 2012, Delaware Investments is required to provide cost basis information to shareholders as well as the IRS on Form 1099-B. The requirement applies only to “covered shares” — shares that are purchased (and subsequently sold) after Jan. 1, 2012. If your account is held by your investment representative (such as a financial advisor or other broker), please contact that representative with respect to reporting of cost basis and available elections for your account.

 

How are registered and beneficial owners impacted?

If you own your shares in a registered account, you will be asked to select a cost basis option. If you hold your shares in “street name” or other nominee, your broker will continue to control the tax election on the account.

 

What are covered shares?

  • Covered shares are those purchased after Jan. 1, 2012, including shares acquired via reinvestment of dividends and capital gains.
  • Delaware Investments is required to report the cost basis information of these shares to both the shareholder and the IRS on Form 1099-B.
  • You may elect the cost basis method to be used. Please see What cost basis methods are available? for more information on cost basis options.
  • Covered shares will begin to deplete after noncovered shares unless otherwise instructed.
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What are noncovered shares?

  • Noncovered shares are those purchased prior to Jan. 1, 2012.
  • The cost basis of your noncovered shares will be calculated separately from the cost basis of your covered shares.
  • Noncovered shares will be automatically depleted from your account first before covered shares.
  • The cost basis of noncovered shares will not be reported to the IRS.
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What are the key dates?

2011 2012 2013
Noncovered shares Covered shares
"Noncovered shares" are any shares purchased before Jan. 1, 2012. Any cost basis reporting is provided to the shareholder only as a courtesy and is not provided to the IRS. "Covered shares" are any shares purchased anytime after Jan. 1, 2012. Cost basis reporting is provided to the shareholder and the IRS. Each February, starting 2013
Tax forms with the required cost basis reporting are mailed to both the shareholder and the IRS, if any covered shares were sold.
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What cost basis methods are available?

Cost basis can be calculated several ways. The table below outlines the different options available to shareholders. We recommend you consult your tax advisor and/or financial professional before making important tax elections for your account(s).

Shareholder options
Average Cost (ACSC)* When you sell shares, we calculate an average cost per share by totaling the adjusted cost of the shares in the account and dividing that total cost by the number of shares. Adjustments may be made to cost per share as a result of prior calculations or other transactions.
First In, First Out (FIFO) Shares purchased first are sold first.
Specific Identification Written consent is provided at the time of the liquidation to identify each share lot that is to be sold.

*Default method used by Delaware Investments

To make an election on your account(s) held with Delaware Investments, you may contact a customer service representative at 866 437-0252 weekdays between 8 a.m. and 8 p.m. Eastern time.

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What happens if I do not choose a cost basis method?

Delaware Investments has selected a default method in the event that we do not receive an election from you. Our default method is not a recommendation and may not be the best method for your situation. The method you choose is an important decision. We urge you to review your options and to consult your account, financial, tax, or other advisor.

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What default method does Delaware Investments use?

Redemptions of covered shares will be reported using the Average Cost method, unless another method is specified. No action is required if you choose to use the Average Cost method on all of your Delaware Investments account(s).

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How do you change methods?

You may choose a different cost basis method at any time by completing a cost basis election form, which is available by calling 866 437-0252. However, if you elect to either use the Average Cost method, or make no selection which defaults to the Average Cost method (see What default method does Delaware Investments use?), any change to your cost basis selection after your first redemption of covered shares will only apply prospectively (that is, share acquired before the change to your cost basis selection will remain subject to the Average Cost method).

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Additional information

In addition, you can obtain a copy of IRS Publication 550 (Investment Income and Expenses) by calling the IRS Forms Distribution Center toll-free number at 800 829-3676 or visiting the IRS website at irs.gov.

If you have any questions, please contact one of our customer service representatives at 866 437-0252 weekdays between 8 a.m. and 8 p.m. Eastern time.

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