Mutual Fund Cost Basis Calculator

What is a Mutual Fund Cost Basis?

The cost basis of a mutual fund is the original value of an investment for tax purposes, adjusted for stock splits, dividends, and return of capital distributions. It's used to calculate the capital gain or loss when you sell your investment. Understanding your cost basis is crucial for accurate tax reporting and effective investment management.

The Mutual Fund Cost Basis Formulas

The key formulas for calculating mutual fund cost basis are:

\[ \begin{align} \text{Total Dividends} &= \text{Original Shares} \times \text{Dividend per Share} \\ \text{New Shares} &= \frac{\text{Total Dividends}}{\text{New Cost per Share}} \\ \text{Total Shares} &= \text{Original Shares} + \text{New Shares} \\ \text{New Cost Basis} &= \text{Original Cost} + \text{Total Dividends} \end{align} \]

Step-by-Step Mutual Fund Cost Basis Calculation

1. Determine the original cost and number of shares purchased.
2. Calculate the total dividends received by multiplying the number of shares by the dividend per share.
3. Calculate the number of new shares purchased with reinvested dividends by dividing total dividends by the new cost per share.
4. Add the original number of shares to the new shares to get the total number of shares.
5. Add the original cost to the total dividends to get the new cost basis.

Example Calculation

Let's calculate the cost basis for a mutual fund investment with these parameters:

• Original Cost: $10,000
• Original Shares: 1,000
• Dividend per Share: $0.50
• New Cost per Share: $11

1. Total Dividends = 1,000 × $0.50 = $500
2. New Shares = $500 ÷ $11 ≈ 45.4545 shares
3. Total Shares = 1,000 + 45.4545 = 1,045.4545 shares
4. New Cost Basis = $10,000 + $500 = $10,500

Visual Representation

The green portion represents the original investment ($10,000), and the blue portion represents the reinvested dividends ($500).