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Cost Basis Information

 

When you sell or transfer shares of a mutual fund from a taxable account, you may have a gain or loss. To determine the gain or loss, you need to know how much you paid for the shares. This is your cost basis — an amount that includes the following:

  • Your Initial Purchase
  • Additional shares you bought over time
  • Any reinvested dividends and capital gains
  • Return of capital and other adjustments

For shares purchased prior to January 1, 2012, the cost basis calculation is the responsibility of the shareholder. Hartford Funds provides estimated cost basis information on Form 1099-B if all information required for the calculation is available within our online records. Please see your tax advisor for questions regarding your cost basis.

Effective January 1, 2012, the IRS requires Hartford Funds to track and report cost basis information and whether gain (or loss) on a sale is short-term or long-term* on IRS Form 1099-B to shareholders and the IRS. Mandatory cost basis, which is a requirement of the Energy Improvement and Extension Act of 2008, is designed to facilitate accurate reporting of gain/loss amounts on the sales of shares of stock. It generally applies to mutual fund shares purchased on or after the January 1, 2012 effective date.

Note: Cost basis information is reported for non-qualified 1099-B reportable accounts only.

 


 

How is Cost Basis Calculated?

There are several ways cost basis can be calculated. Your tax advisor can help you determine the method that makes the most sense for you. The Hartford, its affiliates, employees and agents cannot and do not provide any financial, tax, legal or accounting advice.

Average Cost (ACST) Each time you request to remove shares, this method will add the adjusted cost of the shares in the account and divide the total cost by the number of shares to calculate an average cost for each share.  Adjustments to cost per share may be due to prior calculations or other transactions.  The cost basis for shares purchased on or after January 1, 2012 (covered shares) are averaged separately from the cost of shares purchased before January 1, 2012 (uncovered shares). Uncovered shares are removed first.
First In, First Out (FIFO) Shares purchased first are removed first.
Last In, First Out (LIFO) Shares purchased last are removed first.
High Cost, First Out  (HIFO) Shares with the highest cost per share are removed first.
Low Cost, First Out (LOFO) Shares with the lowest cost per share are removed first.
Loss/Gain Utilization (LGUT)

Shares are removed based on the calculated gain or loss* per share in the following order:

  1. Greatest short-term loss per share to least
  2. Greatest long-term loss per share to least
  3. Least long-term gain per share to greatest
  4. Least short-term gains per share to greatest

Hartford Funds will use the Average Cost calculation method unless you instruct us otherwise.

*"Long term" indicates a security held for more than one year. "Short term" indicates a sale of a security held for one year or less.

 


Actions Affecting Cost Basis

Hartford Funds may take certain actions, such as fund mergers or cash distributions treated as a return of capital, which may affect the cost basis of mutual fund shares you hold. When this occurs, you will find on this page essential information you will need for tax reporting purposes, including:

  • IRS Form 8937, which identifies the fund(s) involved, the action taken and any action you should take to ensure that your records reflect an accurate cost basis of the shares held.
  • Attachment with the data necessary for cost basis calculation.

This information will be available online for a minimum of ten years.

 


More Information About Return Of Capital

A return of capital is paid when a fund makes a distribution in excess of its current and accumulated earnings and profits. The return of capital distribution is a return of the shareholder's original investment, is non-taxable, and reduces the shareholder's cost basis in the fund shares. The amount of the return of capital distribution will be displayed in Box 3 of Form 1099-DIV.

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