Cost Basis FAQs
How is cost basis tax reporting changing?
In 2011, for the first time, the IRS is requiring financial institutions to report cost basis information to the IRS on tax forms. For Oppenheimer fund shares purchased and subsequently redeemed after January 1, 2012 (or January 1, 2011 for the Oppenheimer SteelPath funds), also referred to as covered shares, OppenheimerFunds will track and report cost basis information on IRS Form 1099-B. Your own tax filing deadline will not be affected as a result of this change.
How will OppenheimerFunds calculate my cost basis?
Except for Oppenheimer SteelPath funds, where the default cost basis method is First-In, First-Out (or “FIFO”), the Average Cost tax reporting method will be the default cost basis tax reporting method on your account(s) with OppenheimerFunds, unless you specify otherwise. You or your financial advisor may provide standing instructions for your chosen cost basis tax reporting method via telephone, via our website, oppenheimerfunds.com, or in writing. We strongly recommend that you work with your financial advisor to determine the cost basis tax reporting method that best suits your needs.
If I want to change my reporting method from the default method, which methods of cost basis tracking will OppenheimerFunds accommodate?
We will accommodate any of the following methods of cost basis tracking:
- Average Cost: Shares are redeemed at the Average Cost of all covered shares in the account at the time of the redemption. Specific IRS restrictions apply to changing to and from Average Cost. As mentioned earlier, Average Cost will be a tax lot relief cost basis tax reporting method on your account(s) with OppenheimerFunds, with the exception of the Oppenheimer SteelPath funds, which cannot accept Average Cost as the default method due to their status as C Corporations.
- First-In First-Out (FIFO): Shares purchased first are redeemed first.
- Highest-In First-Out (HIFO): Shares with the highest cost are redeemed first.
- Last-In First-Out (LIFO): Shares purchased last are redeemed first.
- Low Cost: Shares with the lowest cost are redeemed first.
- Specific Share Identification: Shares are redeemed in the order specified at the time of the redemption. We can provide transactional reporting on this method but specific share identification cannot be used as a standing method on your account(s).
For each account you hold with us, you have until the time of your first redemption of covered shares to change your tax reporting method from Average Cost. Once you redeem any covered shares, we will report that sale of covered shares to the IRS using Average Cost, or the standing reporting method on file.
How will this affect my Automatic Withdrawal or Exchange Plan?
If assets are systematically redeemed or exchanged out of your account(s), we will default to using the standing reporting method instructions currently on file. If no instructions are on file, we will default to the default method.
Will I receive one figure for covered and uncovered shares?
No. Even if you use the Average Cost tax reporting method for both uncovered and covered shares, for example, cost basis reporting on uncovered and covered shares will be separate.
Will I still need to include uncovered share amounts when reporting my cost basis information to the IRS?
Yes. While we will not report cost basis information for uncovered shares on Form 1099-B, you will still be required to report this cost basis information to the IRS. Please consult a qualified tax advisor for any questions about how your own tax returns will need to be filed.
If I have multiple account types through OppenheimerFunds, such as a trust account, a sole owner account and a joint tenancy account, will all of these use the same reporting method?
With the exception of the Oppenheimer SteelPath funds, which cannot use Average Cost as a tax lot relief method, we will default your accounts using a uniform “blanket election”, meaning that all accounts held in your name as well as those where you are allowed to negotiate will be subject to the same reporting method. For example, if you are the trustee of a trust and own a sole owner nonretirement account, both of these accounts will default to your standing instructions. Should you choose to do so, you may instruct us to use different methods for each account that you are allowed to negotiate.
How will exchanges from existing accounts into new accounts be handled?
New accounts opened via an exchange will use the cost basis tax reporting method that was in place in the existing account, unless you instruct us otherwise. Exchanges from existing accounts with Average Cost as the tax lot relief method into new Oppenheimer SteelPath accounts will default to FIFO. New accounts opened via an exchange from a money market fund will default to the Average Cost method (except for the Oppenheimer SteelPath funds, where the default method is FIFO),unless we are otherwise instructed. For new accounts opened via a new account application, these accounts will default to Average Cost (except for the SteelPath funds as noted), unless another method is indicated on the new account application.
Are shares purchased on or after January 1, 2012 (or in the case of Oppenheimer SteelPath funds January 1, 2011) with reinvested capital gains and dividends considered covered shares?
Yes, since these shares are purchased after the IRS regulations take effect, they are considered covered shares, even if the reinvested dividends and capital gains were earned on uncovered shares.
Where else may I find answers to my questions?
The IRS’ website contains information on changes to cost basis reporting. Please visit www.irs.gov for additional information.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
Before investing in any of the Oppenheimer funds, investors should carefully consider a fund's investment objectives, risks, charges and expenses. Fund prospectuses and summary prospectuses contain this and other information about the funds, and may be obtained by asking your financial advisor, visiting oppenheimerfunds.com, or calling 1.800.CALL OPP (225.5677). Read prospectuses and summary prospectuses carefully before investing.
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