Cost basis requirements
- What is cost basis?
- What is changing?
- How are registered and beneficial owners impacted?
- What are covered shares?
- What are noncovered shares?
- What are the key dates?
- What cost basis methods are available?
- What happens if I do not choose a cost basis method?
- What default method does Delaware Investments use?
- How do you change methods?
- Additional information
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 your cost basis and the amount you received when you sold or redeemed your shares represents your gain or loss. In this way, your cost basis may help you determine how much you owe in taxes or can claim as a deduction.
What is changing?
Beginning Jan. 1, 2012, Delaware Investments will be required to provide cost basis information to both shareholders and the Internal Revenue Service on Form 1099-B. The requirement will apply only to “covered shares” — shares that are purchased (and subsequently sold) after Jan. 1, 2012.
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 will be 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.
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.
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 (ACST)* | 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 800 851-9677 weekdays between 8 a.m. and 8 p.m. Eastern time.
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.
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).
How do you change methods?
You may choose a different cost basis method at any time by completing the Cost Basis Election form. 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 share will only apply prospectively (that is, share acquired before the change to your cost basis selection will remain subject to the Average Cost method).
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 www.irs.gov.
If you have any questions, please contact one of our customer service representatives at 800 851-9677 weekdays between 8 a.m. and 8 p.m. Eastern time.