Mandatory Cost Basis Reporting

Transcription

1 Mandatory Cost Basis Reporting Information you need to know Internal Revenue Service (IRS) Cost Basis Reporting Regulations for Mutual Funds Under the new IRS cost basis reporting regulations all mutual fund companies, including Pioneer, must calculate and report to the IRS and to the shareholder the cost basis of mutual fund shares that are sold from non-retirement accounts (redemptions, exchanges out and systematic withdrawals are considered sales). For IRS reporting requirements, cost basis is defined as the amount you pay for shares acquired on or after January 1, 2012, also known as covered shares. Cost basis is usually the purchase price you paid for your shares, including any sales charges. Exchange purchases and reinvested dividends and capital gains affect the calculation of cost basis. Pioneer will calculate cost basis for your covered shares using one of the methods accepted by the IRS.

2 Some key points regarding cost basis reporting Cost basis reporting only applies to non-money market taxable accounts Pioneer will report your cost basis for redemptions made from your taxable non-money market accounts only. Retirement accounts (e.g. IRAs, 403bs, Uni-Ks, etc.) are not subject to cost basis reporting. Covered and noncovered shares Mandatory cost basis reporting applies only to shares acquired after December 31, The IRS has designated these shares as covered shares. Shares purchased before January 1, 2012, are noncovered shares. Beginning January 1, 2012, using the cost basis method chosen for your account, Pioneer will calculate the cost basis for any covered shares sold. The cost basis will be reported to the IRS and to shareholders on IRS Form 1099-B. The Average Cost method (Pioneer s default method) will be used if you do not elect another cost basis accounting method. Cost basis method changes will only be accepted in writing or via Pioneer s website. If you are making cost basis method election changes via the web, you do not need to complete the attached form. Choosing a cost basis accounting method for your covered shares There are a number of cost basis calculation methods available to you that are acceptable by the IRS for cost basis reporting. You may choose a method for your account or you may elect to have Pioneer continue to calculate your cost basis using the Average Cost method (Pioneer s default method). Regardless of the method used, cost basis on covered shares will be reported to the IRS. If you wish to choose a cost basis method other than Pioneer s default method you may visit the Tax Center at Pioneer s online website, us.pioneerinvestments.com, and download the Pioneer Investments Cost Basis Election Form, or you can call Pioneer at to obtain an Election Form. You may also change your cost basis method online by logging into your Pioneer account and following the instructions. Cost basis method changes will only be accepted in writing or via the Pioneer website. You are able to change your cost basis election at anytime, however, if you are changing from the average cost method and have previously sold covered shares in your account, your newly elected method only applies to shares acquired after you make the change. Cost basis accounting methods available to you Average Cost Average Cost is Pioneer s default method. Using this method, all shares purchased in an account, including exchange purchases and reinvested dividends and capital gains, are added together and divided by the total number of shares to determine an average cost per share. When you sell shares the cost basis of the shares sold is determined by multiplying the number of shares sold by the average cost per share at the time of the sale. The average cost per share is recalculated each time additional shares come into an account. There are certain attributes that are unique to the Average Cost method If you wish to change from average cost to another method you must request the change in writing or via Pioneer s website. If you decide to change from average cost to another method you must do so before you redeem any covered shares in your account. This is called revocation by the IRS. Pioneer has been using the Average Cost method to calculate cost basis, if available, for noncovered shares for eligible shareholders and Pioneer will continue to provide this service. If you wish to continue to use the Average Cost method for your covered shares you need not take any action. Pioneer will calculate your cost basis using the Average Cost method and report the cost basis to you and to the IRS.

3 Pioneer also offers cost basis methods other than the Average Cost method. If you choose SLID, Pioneer cannot provide cost basis for noncovered shares. You may want to consult your tax advisor before electing a cost basis method. If you choose a method other than SLID Pioneer will redeem noncovered shares first. The future election option will apply your elected cost basis method to your new eligible Pioneer accounts. Methods available to you other than the Average Cost method First In, (FIFO) Using this method, the shares acquired first (the oldest shares in your account) are sold first. Unlike the Average Cost method, where all shares are rolled up and each share is given the same average cost per share, using FIFO, shares are sold on a lot by lot basis and the actual price paid for the shares is the cost basis. Last In, (LIFO) LIFO is similar to FIFO in that shares are sold on a lot by lot basis, except that the last shares purchased are redeemed first. High Cost, (HIFO) Using HIFO, the highest cost shares are sold first on a lot by lot basis. Low Cost, (LOFO) With LOFO, the lowest cost shares are sold first on a lot by lot basis. Loss/Gain Utilization (LGUT) Using this method, shares are sold on a lot by lot basis and the shares that generate short-term losses are sold first, then shares with long-term losses are sold. Shares with long-term gains are sold next and shares with short-term gains are sold last. Specific Share Lot Identification (SLID) Using this method, the shareholder identifies which specific share lots are to be sold and informs Pioneer at the time of each sale. The original purchase dates and prices of the share lots chosen determine both the cost basis and the holding period. There are certain attributes that are unique to SLID Shareholders must select a secondary cost basis method to be used when they do not identify shares to be sold at the time of sale and when sales are made under a systematic withdrawal or systematic exchange plan. Any of the methods described above may be designated the secondary method except for the Average Cost method. If a shareholder does not choose a secondary method, Pioneer will use FIFO to deplete share lots. Important information regarding cost basis reporting for noncovered shares If you choose SLID, Pioneer can no longer report cost basis for your noncovered shares. If you choose any method other than SLID Pioneer will redeem all noncovered shares from your account before any covered shares are redeemed. It s important to remember that Pioneer uses only the Average Cost method for noncovered shares, and that Pioneer calculates cost basis on noncovered shares for eligible accounts only. Cost basis reporting for your current and future Pioneer accounts If you have more than one Pioneer account, Pioneer can apply your elected cost basis method, or Pioneer s default method to all of your accounts. You may request that your chosen cost basis method be used on any Pioneer accounts you open in the future by selecting the future account election option on Pioneer s website or on the Cost Basis Election Form. Pioneer Does Not Give Tax Advice. Please Consult Your Tax Advisor or Financial Planner. Pioneer does not provide tax guidance to shareholders and you should consult your tax advisor or financial planner for guidance when choosing a cost basis accounting method. Also, you may want to visit the IRS website at for tax information. IRS Publication 551, Basis of Assets, and Publication 564, Mutual Fund Distributions, may also be helpful.

4 Pioneer Investments Cost Basis Method Election Form Internal Revenue Service (IRS) regulations require us to report cost basis information to you and to the IRS for redemptions of mutual fund shares acquired after January 1, 2012 (covered shares). Complete this form to elect your cost basis method(s). Mail to: Pioneer Investment Management Shareholder Services, Inc. (PIMSS), PO Box Boston, MA Overnight Address: 30 Dan Rd., Canton, MA If you have questions, call Pioneer at Information is also available online at Please print in blue or black ink. 1 Registration Information Note: All registered owners/trustees must sign in Section 3. Name(s) on account Taxable Owner / Entity Name (First, Middle, Last) Social Security/Tax Identification Number Joint Owner s, Co-Trustee s, Guardian s, or Conservator s Name (First, Middle, Last) Street Address City State Zip Account Number(s) 2 Cost Basis Method Note: Your chosen cost basis method for covered shares will apply to all accounts you identify that are registered under the tax identification number provided above. Retirement and money market accounts are excluded from cost basis reporting to the IRS. You may use this form to change your election, although the method cannot be changed with respect to past redemptions of covered shares. The cost basis method provided shall replace any cost basis method currently on file for the account(s) referenced on this form and may apply to accounts subsequently opened from the accounts updated with this form. If you are changing from the average cost method and you have redeemed or exchanged any covered shares prior to the change, the new method will apply only to the covered shares acquired after the account has been updated to reflect the new method. Please choose a cost basis method(s) by selecting the appropriate box(es) below.. Average Cost First In, Specific Lot ID* High Cost, Low Cost, Loss/Gain Utilization Last In, Use one method for all of my/our accounts Apply chosen election to future taxable accounts opened under the above Social Security/Tax Identification Number. OR Average Cost First In, Specific Lot ID* High Cost, Low Cost, Loss/Gain Utilization Last In, Different methods for each of my/our accounts** Fund / Account Number Fund / Account Number *By choosing Specific Lot ID the account owner (s) are required to identify the specific share lot to redeem at the time of the redemption instructions to Pioneer. In the event that the specified tax lot has already been depleted or Pioneer is unable to process the redemption using the lot(s) identified, a secondary cost basis accounting method of (provide method here) is to be applied. However, if Pioneer is unable to process the redemption using either of the two accounting methods selected here, Pioneer will deplete the shares for the redemption using the First In, method, and redeem the oldest shares first. Note: Average Cost and Specific Lot ID cannot be used as a secondary accounting method. Electing Specific Lot ID limits Pioneer s ability to provide cost basis information for non-covered shares; this limitation means you should keep a permanent record of cost basis information for all of your non-covered shares. **If you want to include more than two fund/account numbers, please attach the appropriate information. This attachment must be signed and dated to be considered in good order.

5 3 Signatures All account owners/trustees must sign. For UGMA/UTMA accounts, the custodian must sign. I certify that I am the person(s) authorized to make this tax lot identification election. I understand that this tax lot identification election will be applied as of the date this form is received in good order. Taxable Owner / Entity Name Signature Joint Owner s, Co-Trustee s, Guardian s, or Conservator s Signature Date (mo/day/yr) Date (mo/day/yr) 4 Glossary Average Cost A cost basis method of calculating the adjusted cost-basis for shares. All purchase costs are added together in an aggregate cost amount. The cost per share is then determined by dividing the aggregate cost amount by the total shares in the account. The basis of the shares redeemed is determined by multiplying the shares redeemed by the cost per share. Covered Shares Shares of mutual funds acquired on or after January 1, These are also referred to as post-effective date shares. First In, (FIFO) A cost basis method that depletes the earliest-acquired shares first ; the oldest tax lots are redeemed first. High Cost, (HIFO) A cost basis method that will deplete share lots with the highest cost first. The available lots with the highest cost are sold first. Last In, (LIFO) A cost basis method that depletes the most recently-acquired shares first. Loss/Gain Utilization (LGUT) A cost basis method accounting method that evaluates losses and gains, and also strategically selects lots based on the loss/gain in conjunction with the holding period. The Loss/Gain Utilization election method depletes lots with losses before lots with gains, consistent with the objective of minimizing taxes. For lots that yield a loss, short-term lots will be redeemed before long-term lots. For gains, long-term lots will be redeemed before short-term lots. With favorable long-term capital gains rates, long-term gain lots are given priority over short-term gains to reduce taxes assessed. Low Cost, (LOFO) A cost basis method that will deplete shares with the lowest cost first. The available lots with the lowest cost are sold first. Specific Lot Identification (SLID) A cost basis method that allows a shareholder to identify specific share lots to sell. SLID gives the shareholder direct control in determining realized gains or losses in a tax year. This method requires the planning and record-keeping on the part of shareholder and shareholders must provide the fund their lot selection prior to each redemption occurrence. A shareholder electing this method must also provide a secondary method to be used when specific lots are not identified at the time of the redemption order. In the event that both the specific lot selection and secondary methods are not available, the fund will sell lots using the FIFO method. This material is not intended to replace the advice of a qualified attorney, tax adviser, investment professional or insurance agent. Before making any commitment regarding the issues discussed here, consult with the appropriate professional adviser. Pioneer Investments 60 State Street, Boston, MA Pioneer Investments us.pioneerinvestments.com

6 Pioneer Investments 60 State Street, Boston, Massachusetts Pioneer Investments. us.pioneerinvestments.com