Mandatory Cost Basis Information

Mutual fund companies are required to report your cost basis information on IRS Form 1099-B for covered shares that are acquired and subsequently redeemed on or after January 1, 2012. The information on this page is intended to help answer your questions and inform you on:

The definition of cost basis

A mutual fund share is sold at a gain or loss due to the change in value that occurs between the date of purchase and the date of sale. If a mutual fund share is sold above its cost, the difference is a capital gain. If a mutual fund share is sold below its cost, the difference is a capital loss. Shareholders must pay taxes on the capital gain for the year in which the shares were sold; conversely, the shareholder may be able to claim a tax deduction for a capital loss, or use the loss to offset a gain.

The IRS cost basis requirements

When you sell covered mutual fund shares purchased on or after January 1, 2012, Invesco is required to report your cost basis on IRS Form 1099-B. Per section 1012 of the IRS tax code, mutual fund companies must select a default cost basis method for all fund shares. Invesco has selected Average Cost as the default method for all Invesco open-end funds except for the Invesco MLP fund which utilizes a default method of First-In-First Out (FIFO). Taxpayers, however, may select a different option from the fund's default method. If your fund's default method fits your tax situation, then there is no need for you to take action.

What this means for your Invesco account

If you own shares of an Invesco fund acquired prior to the January 1, 2012, effective date, your account shares are divided into two categories for cost basis purposes. One group includes your noncovered shares and the other group includes your covered shares.

Noncovered shares include shares that were acquired prior to the new cost basis effective date (January 1, 2012). Average Cost is the method Invesco has provided to shareholders in the past as an added service. Invesco will continue to provide this service, when available, for shares purchased prior to January 1, 2012; however, this information will not be reported to the IRS. Only cost basis information for shares purchased after January 1, 2012, will be reported to the IRS. The costs of your noncovered shares will be maintained and calculated separately from your covered shares. You can use this information as needed for tax purposes. Invesco, however, will only report the redemption transaction for noncovered shares to the IRS and not the cost basis information associated with the noncovered shares.

Shares acquired after January 1, 2012 (i.e., transfers from your broker) in which cost basis information is not provided to the fund are also treated as noncovered shares. Invesco will report the redemption transaction to the IRS but not the cost basis information, since we will not have it available.

Invesco will always deplete your noncovered shares first, except when you instruct us to redeem a specific share lot. When depleting your noncovered shares, Invesco will deplete the shares in the same order in which they were acquired.

Covered shares include shares acquired after the new cost basis effective date (January 1, 2012) and for which Invesco has the cost basis information on record. The cost of these shares is maintained separately from your noncovered shares. Cost basis information will be reported to you and the IRS for your covered shares. You will receive the cost basis information as well as the gain or loss information for any covered shares you have sold on Form 1099-B and will then use that information when completing your IRS tax return. You should expect to receive your Form 1099-B for the previous year's redemptions prior to February 15th of each year.

When you redeem your covered shares by phone or via our website, you will be asked to confirm the cost basis method to be applied. When redeeming your covered shares by mail, you will be expected to state the cost basis method to be used on your redemption request. If no method is stated on your request, Invesco will use the method you previously elected for your account's covered shares. If you have not previously elected a cost basis method, the fund's default method will be used for the covered shares in your account.

Your fund's default method for cost basis

Invesco has selected Average Cost as the default method for all Invesco open-end funds except for the Invesco MLP fund which utilizes a default method of First-In-First Out (FIFO). Invesco will use your fund’s default method to calculate the cost of your covered shares unless you elect another method.

If your fund's default method fits your tax situation, then there is no need for you to take action.

To determine if another method may be more appropriate for your tax situation, we recommend that you consult your tax advisor.

Available cost basis methods

There are several other methods for calculating cost basis including: Average Cost, First-In-First-Out (FIFO), Last-In-First-Out (LIFO) and various versions of specific share identification such as High Cost (HIFO), Low Cost (LOFO), Loss/Gain Utilization (LGUT) and Specific Lot Identification (SLID).

If you wish to use a method other than your fund's default method, it is important that you provide your elected method to us before redeeming shares from your account. You can elect or change your cost basis method by accessing your account through our website at invesco.com/us .

Changes to your cost basis method cannot be applied to shares that have already been redeemed. It is important to consider the tax implications and elect a method prior to redeeming shares of your fund.

Shareholders can change their cost basis method at the time of redemption. If you previously redeemed shares using Average Cost and later decide to change your cost basis method, the newly elected method will become effective only for shares acquired after the change was made. Shares acquired prior to the change will retain the previously averaged cost per share when calculating the cost basis at the time of sale.

How to obtain additional information

If you have questions about cost basis or the reporting of gains and losses, please contact your tax advisor or reference the Internal Revenue Service website at irs.gov.

If you need information about your Invesco account, please contact us by one of the following methods:

  • Call our toll free number at 800 959 4246.
  • Mail correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078

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