Cost Basis Summary
When you sell or exchange shares of a fund or other security, you may have a capital gain or loss that must be reported to the IRS. To calculate the gains or losses from shares sold, you must know the cost basis, or the original price paid, for the different shares you own. Any transaction that increases or decreases the number of shares in an account can affect cost basis.

On October 20, 2010, the Internal Revenue Service (IRS) issued new mandatory regulations regarding cost basis for many types of securities, including open-end mutual funds and closed-end funds. Under the new regulations, PIMCO is required to report cost basis information to the IRS.

The effective date for the new regulations was January 1, 2012. The new cost basis regulations treat shares acquired after the effective date as “covered shares.” PIMCO will report the cost basis for all covered shares in taxable (non-retirement) accounts to both you and the IRS. When filing your tax return, you will be required to use the cost basis reported on your 1099-B for your covered shares.

Fund shares acquired before the effective date are considered non-covered, meaning they are exempt from these reporting requirements. If available, PIMCO will continue to provide cost basis information on non-covered shares to shareholders but it will not be reported to the IRS.

Two key provisions in the cost basis regulations may require action on the part of shareholders:

  1. Mutual fund companies must select a default method for cost basis reporting and notify you of its selection. You may choose the same method as your fund’s default or you may choose any other cost basis reporting method. This election is good for all future transactions unless you either revoke or change the election. The default methods for PIMCO are:

    • PIMCO Open-End Mutual Funds: Average Cost (ACST)
    • PIMCO Closed-End Funds: First In, First Out (FIFO)


  2. The regulation removes the exemption from Form 1099-B reporting by S-Corporations. Be advised that in order to establish proper identification, all corporations must complete a W-9 form. CORPORATIONS THAT FAILED TO RETURN THE W-9 WERE DEFAULTED TO AN S-CORPORATION AND SUBJECT TO 1099-B REPORTING.