Harbor Funds | Cost Basis

Customer Support FAQs

Online Access
Quicken
Importing Tax Data
Account Services
Re-Registrations

Retirement FAQs

Roth IRA
Traditional IRA
Rollovers

Tax FAQs

Cost Basis
Understanding Form 5498
Understanding Form 1042-S
Understanding Form 1099-DIV
Understanding Form 1099-B
Understanding Form 1099-R
Foreign Tax
Cost Basis
What is cost basis? Show
The original value of your mutual fund shares for tax purposes (usually the purchase price), adjusted for stock splits, dividends and return of capital distributions. This value is used to determine the capital gain, which is equal to the difference between the share's cost and the current market value. Also known as "tax basis".

Internal Revenue Service (IRS) regulations require mutual funds to provide cost basis information for tax years beginning January 1, 2012 to shareholders and the IRS.
Which of my mutual fund shares will be subject to this tax reporting? Show
Redemptions of shares purchased after January 1, 2012 ("covered shares") will be subject to mandatory cost basis reporting as part of your Form 1099-B. Redemptions of shares purchased before January 1, 2012 ("noncovered shares") will not be subject to mandatory cost basis reporting.
Does the cost basis reporting requirement affect my money market funds? Show
No, cost basis is not tracked on these types of accounts because the price per share does not normally fluctuate and redemptions are not reported on form 1099-B.
Does the cost basis reporting requirement affect my IRA accounts? Show
No, cost basis is not tracked on these types of accounts.
How is this cost basis calculation different from what you used to send me before? Show
Prior to the new regulations, we chose to provide shareholders with an optional cost basis accounting statement using the Average Cost method. This information was not provided to the IRS and shareholders were under no obligation to utilize it.

Beginning in tax year 2012, cost basis information will be reported to the IRS. We will now support the use of several different cost basis accounting methods.
What are covered shares? Show
Covered shares are shares obtained by the shareholder that require cost basis and gain/loss reporting to the shareholder and to the IRS.

Covered shares are shares acquired after January 1, 2012 where cost information is available.
What is your fund's primary method and do I have to use it? Show
The Harbor Funds primary accounting method is Average Cost. You are under no obligation to use this method and may select a different method by using this Cost Basis Election Form.
Why did Harbor Funds choose to provide Average Cost previously? Show
Harbor Funds provided Average Cost as a courtesy as we believe it is the most commonly utilized cost basis method for mutual funds.
What other methods does Harbor Funds allow to determine cost basis? Show
Other than Average Cost, Harbor Funds allows shareholders to choose from the following cost basis methods.
  • First In First Out
  • Last In First Out
  • High Cost First Out
  • Low Cost First Out
  • Loss/Gain Utilization
  • Specific Share Identification (at the time of transaction)
Why were these options not available previously? Show
Previously, the only method available from Harbor Funds was the Average Cost method which was provided as a courtesy. Due to the new IRS regulations, additional cost basis methods are available.
Will you be recalculating my cost basis on redemptions made prior to January 1, 2012 using the new cost basis method? Show
No. Harbor Funds will not recalculate redemptions prior to January 1, 2012, but will continue to provide Average Cost basis information for shares acquired prior to January 1, 2012 when available.
If I sell both covered and noncovered shares after January 1, 2012, what will happen? Show
Harbor Funds will determine a cost basis for your covered shares (i.e. shares acquired after January 1, 2012) based upon your selected cost basis method and report that to you and to the IRS. Harbor Funds will separately provide you with a cost basis calculation for your noncovered shares (i.e., shares acquired prior to January 1, 2012) that is based upon the Average Cost method. Redemptions of noncovered shares are not reported to the IRS.
Can I make a one time change at the time of redemption? Show
Yes, you can request a one-time override of your previous choice at the time of redemption without changing your previous method permanently.
When can I use specific share identification as my cost basis method? Show
You may only use specific share identification at the time of redemption by overriding the existing cost basis method applicable to your account. Specific share identification will only apply to that particular redemption transaction and your account would revert to your prior cost basis method for future redemptions. However, specific share identification may not be available in most instances when the existing cost basis method for the account is Average Cost. If Average Cost is the method applicable to your account and you wish to make a redemption using specific share identification, you should contact Harbor Funds to determine whether specific share identification would be available for that transaction.