Frequently Asked Questions
- Year-End Tax Forms and Statements
- Composite Form 1099
- Form 1099-DIV
- Form 1099-B
- Cost Basis Reporting Information
- Form 1099-Q
- Form 1099-R
- Form 5498 and Form 5498-ESA
- Form 1042-S
- Tax Withholding for Retirement Accounts
- Capital Gains—Long-Term, Short-Term
- Direct U.S. Government Obligation
- Foreign Source Income/Foreign Tax Paid
Answers to Common Questions About Cost Basis Reporting
The Internal Revenue Service (IRS) requires Franklin Templeton, and other mutual fund companies, to provide cost basis information to both shareholders and the IRS when certain mutual fund shares acquired on or after January 1, 2012, are sold or exchanged.
Below are answers to some common questions about cost basis reporting and the impact these reporting requirements will have on your Franklin Templeton account(s).
- The cost basis of mutual fund shares is generally the amount paid for the shares when they were initially purchased, including any sales charges paid on the purchase of the shares. Your cost basis may be subsequently adjusted for wash sales, deferred sales charges and other items. When these shares are sold or exchanged, you may have a gain or a loss on that transaction, and you may have to pay taxes on any gains earned from the transaction. The capital gain or lossCapital Gain or LossCapital Gainequals the amount realized on the sale minus the cost basis of the shares sold and must be reported to the IRS on your tax return.
If the selling price of the shares is greater than the adjusted basis of the shares at the time of the exchange or redemption.
If the selling price of the shares is less than the adjusted basis of the shares at the time of the exchange or redemption.
There are two types of capital gains and losses:
In short, cost basis is used to determine capital gains and losses for tax purposes when mutual fund shares are sold or exchanged. There are two methods that Franklin Templeton offers for calculating cost basis (specific share identification and average cost), and investors may choose the method they feel is most appropriate given their personal tax situation.
Cost basis information will be reported on Composite Form 1099 in the 1099-B section. This form is available online and was mailed February 9, 2015.
You can expect to see information about the date of acquisition (generally the purchase date), date of sale or exchange, type of gain or loss (long-term or short-term), cost basis amount, wash sale adjustments, whether the shares were covered or noncovered and if the basis was reported to the IRS.
- I didn’t sell or exchange shares in 2014. Will I still have to report the cost basis information appearing on my Year-End Asset Summary Statement to the IRS?
No. Cost basis reporting is only required when shares are sold or exchanged from your account.
Important Legal Information
The information contained in this Tax Center is not intended to be a complete discussion of all federal or state income tax requirements. This information cannot be used by an investor to avoid any income tax penalties that may be imposed under the Internal Revenue Code. Investors should seek advice from a financial and/or tax advisor about the potential tax implications of their investments in Franklin Templeton fund(s) based on their individual circumstances.
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