Brokerage Default Cost Basis Methods

Jack Dunham on

My Brokerage firm (Fidelity) makes a distinction between cost basis vs default disposal method. For both stocks/etf and mutual funds they list FIFO as the default disposal method which is the same terminology Bivio uses for Default Cost Basis Method in the Tax Preparation webinar. However, Fidelity list the cost basis as 'Actual Cost' for Stocks/ETF and 'Average Cost' for Mutual Funds.

Should I change the method Fidelity uses for Cost Basis on Mutual Funds from 'Average Cost' to 'Actual Cost' so that my Bivio records will be consistent with my Fidelity records or leave it as 'Average Cost'?

I haven't sold any positions yet, but I want to be proactive. Thanks in advance.

Laurie Frederiksen on

Dear Jack,

It is good you are asking these questions.

What you want (no matter what your brokerage terminology) is for shares to be selected on a FIFO (First In First Out) basis. You want to make sure this is the selection for both stocks and Mutual funds.

This keeps your club record keeping the simplest. bivio makes your entries FIFO by default. If you use a different method, you can adjust the lot selection in bivio after the fact. But that creates more work for your treasurer and more potential for a problem to occur.

There is currently no way to adjust to match Average cost for mutual funds so it is very important to change that one.

Laurie Frederiksen
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On Tue, Jan 6, 2015 at 4:03 PM, Jack Dunham via bivio.com <user*34260000001@bivio.com> wrote:

My Brokerage firm (Fidelity) makes a distinction between cost basis vs default disposal method. For both stocks/etf and mutual funds they list FIFO as the default disposal method which is the same terminology Bivio uses for Default Cost Basis Method in the Tax Preparation webinar. However, Fidelity list the cost basis as 'Actual Cost' for Stocks/ETF and 'Average Cost' for Mutual Funds.

Should I change the method Fidelity uses for Cost Basis on Mutual Funds from 'Average Cost' to 'Actual Cost' so that my Bivio records will be consistent with my Fidelity records or leave it as 'Average Cost'?

I haven't sold any positions yet, but I want to be proactive. Thanks in advance.

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