Important Changes Affecting Your Non-Retirement Account
New IRS regulations require mutual funds to track cost basis for fund shares purchased on or after January 1, 2012 and report the basis to shareholders and the IRS. Generally, these shares are considered "covered shares." As required by these regulations, we will determine the basis of your covered shares in accordance with our default accounting method (Average Cost), unless you elect a different permissible method, and report cost basis information to you and the IRS when covered shares are sold.
What is cost basis?
Generally, cost basis is the price you paid to acquire shares, including any shares you acquire by reinvesting dividends and capital gains. When shares are sold, the gain or loss on your investment is the difference between the cost basis of the shares sold and the sales price.
Back to list of questions
How will Heartland Funds calculate my cost basis?
Heartland Funds has selected Average Cost as our default accounting method for covered shares. Using this method, we calculate the cost of shares in an account by averaging the cost of all purchases made after January 1, 2012. Shares will be redeemed in a first in, first out order. You do not need to take action if you would like us to determine the cost basis of your covered shares using the Average Cost method.
Back to list of questions
What other methods of cost basis tracking will Heartland Funds accommodate?
If you would like us to determine the cost basis of your covered shares using a method other than Average Cost, you may elect one of the cost basis methods below:
| First In, First Out (FIFO) |
The first shares purchased in an account are the first shares sold. |
| Last In, First Out (LIFO) |
The last shares purchased in an account are the first shares sold. |
| High Cost, First Out (HIFO) |
The shares with the highest purchase price are the first shares sold. |
| Low Cost, First Out (LOFO) |
The shares with the lowest purchase price are the first shares sold. |
| Specific Share Identification |
The shares you specify are depleted. If shares are not specified, then FIFO is used. |
Back to list of questions
How do I designate a cost basis method other than Average Cost?
If you would like to choose a cost basis method other than Average Cost, you may download and print the Cost Basis Election Form or call us at 1-800-432-7856 to request this form. It is important that we receive your election before the first redemption, exchange, transfer or other disposition of covered shares.
Back to list of questions
Will I receive cost basis information for shares purchased prior to January 1, 2012?
Starting in 2012, your account will maintain separate cost basis calculations: one for noncovered shares (shares acquired prior to January 1, 2012) and another for covered shares (shares acquired on or after January 1, 2012). We will determine the cost basis of noncovered shares using the Average Cost method and provide this information to you as a courtesy to you, when available. The cost basis of covered shares will be determined using our default accounting method, unless you have elected a different method for covered shares.
Back to list of questions
How and when will I receive cost basis information?
When shares are redeemed, exchanged, transferred or disposed of from your account, noncovered shares will be depleted before covered shares, unless you specify otherwise. For your taxable accounts, we will provide you with IRS Form 1099-B reporting the cost basis of noncovered shares (if available) and covered shares. The cost basis information we provide for noncovered shares is provided to you as an added service and you are not required to use this information. However, the cost basis information we provide for covered shares will be reported to the IRS and you are required to use this information when preparing your individual income tax return.
Back to list of questions