To figure your gain or loss using an average basis, you must have acquired the identical shares at various times and prices or you acquired the shares after 2011 in connection with a dividend reinvestment plan (DRP) and left them on deposit in an account kept by a custodian or agent.

To calculate average basis:

• Add up the cost of all the shares you own in the mutual fund.
• Divide that result by the total number of shares you own. This gives you your average per share.
• Multiply the average per share by the number of shares sold.

If you wish to use the average basis to figure the gain on the sale of identical mutual fund shares, you must elect to do so. To choose the election, there are two separate processes for making the election for average basis method for covered and noncovered securities. See "Average Basis" in Publication 550, Investment Income and Expenses (Including Capital Gains and Losses) for information on how to make these elections.

If you were using the double-category method for figuring your average basis on stock acquired before April 1, 2011, refer to Publication 550.