Cost Basis Accounting Methods

Method & AbbreviationBasis CalculationShare Depletion Order
Average Cost (ACST)1,4 Average of all shares in the account. Oldest shares redeem first.
First In First Out (FIFO) Original share purchase price. Oldest shares redeem first.
High Cost First Out (HIFO)1,4 Original share purchase price. Shares with the highest original purchase price redeem first.
Loss/Gain Utilization (LGUT)2,4

Selects the most advantageous shares to redeem to obtain desired gain or loss.

Shares to redeem are identified by system calculation.
Last In First Out (LIFO)4 Original share purchase price. Newest shares redeem first.
Specific Lot Identification (SLID)3,4 Original share purchase price. Shareowner selects the shares they wish to redeem.
Low Cost First Out (LOFO)4 Original share purchase price. Shares with the lowest original purchase price redeem first.

Average Cost
Method of calculating the adjusted cost basis for shares. All of the purchase costs are added together in an aggregate cost amount. The cost per share can be determined by dividing the aggregate cost amount by the total shares in the account.  The basis of the shares redeemed can then be determined by multiplying the shares redeemed by the cost per share.

1Average Cost is the default accounting method. You have a right to change or "revoke" the Average Cost method before making your first redemption of covered shares. If you previously elected Average Cost and wish to make a change, you must revoke your election in writing.

FIFO (First In First Out)
Method which depletes tax lots used for a redemption based on the oldest available tax lots. The oldest available lots are redeemed first.

HIFO (High Cost First Out)4
Method which depletes tax lots used for a redemption based on the highest price that was paid for the shares during a certain time period. The available lots with the highest cost are sold first.

LGUT (Lost/Gain Utilization)4
2Loss Gain Utilization will decrement lots taking losses first. For lots that yield a loss, short-term lots will be redeemed ahead of long-term lots. For gains, long-term lots will be redeemed ahead of short-term lots. With favorable long-term capital gains rates, long-term gain lots are given priority over short-term gains to reduce taxes assessed.

LIFO (Last In First Out)4
Method which depletes tax lots used for a redemption based on the newest available tax lots. The newest available lots are redeemed first.

SLID (Specific Lot Identification)4
SLID is a method of identifying the adjusted cost basis of shares. Each individual acquisition of shares is tracked separately by acquisition date and cost per share. Shares with common characteristics (acquisition date and cost per share) are grouped in the same lot. This method is sometimes referred to as lot accounting. When shares are redeemed, they are redeemed in a specific sequence to identify the shares and cost basis according to the preferences of the owner. The adjusted cost basis of the shares redeemed is determined by multiplying the shares redeemed from each lot by the cost per share of that lot. Redemption sequences that may be used are:

  • FIFO (First In First Out)
  • LIFO (Last In First Out)
  • High Cost
  • Low Cost
  • A list of specific lots to be redeemed (choose a Lot)

3If SLID is chosen as the primary Cost Basis account method then Average Cost cannot be chosen as a secondary method.

LOFO (Low Cost First Out)4
Method which depletes tax lots used for a redemption based on the lowest price that was paid for the shares during a certain time period. The available lots with the lowest cost are sold first.

Cost Basis Reporting

Please contact a Client Service Representative at 1-800-341-7400 with questions regarding your Cost Basis election.