Cost Basis Reporting Changes

In October 2010, the Internal Revenue Service issued new regulations regarding cost basis that were established pursuant to the Economic Stabilization Act of 2008. Under the regulations, mutual funds are required to report cost basis information to the IRS for all shares acquired on or after January 1, 2012.

When you sell or exchange shares of your Thornburg Fund, you may have a capital gain or loss that you may be required to report to the IRS. To calculate the capital gain or loss from sold or exchanged shares, you must know the original price paid, or cost basis, for the sold shares. Any transaction that increases or decreases the number of shares in your account can affect the cost basis. Cost basis reporting applies to regular taxable accounts and to accounts owned by S Corporations. Cost basis reporting does not apply to IRA or Retirement Platform accounts.

The effective date for shareholders of mutual funds is January 1, 2012.

  • The new regulations treat shares acquired before the effective date as non-covered shares. Thornburg Investment Management is not required to report cost basis to the IRS for shares purchased prior to the effective date. For certain eligible accounts, we have been maintaining Average Cost information on your account(s) as a service. You have not been obligated to use this information in your tax reporting.

  • Shares acquired on or after the effective date are considered covered shares. Thornburg Investment Management will now report the cost basis for all covered shares to both you and the IRS. When filing your tax return, you will be required to use the cost basis reported on your 1099-B for your covered shares.

As numerous cost basis methods are available to you, in November we will send election forms to the appropriate shareholders to solicit their election for the cost basis calculation of their covered shares. These methods are defined on the election form. You will have 45 days to return the election form. If you do not return the election form, your account will be coded with our default cost basis method. Thornburg Investment Management will utilize Average Cost as our default cost basis accounting method for covered shares . It is not necessary to return the election form if you would like to use the Thornburg defaulted Average Cost method. In addition, we will be sending W-9 forms to accounts that appear by registration and account coding to be a corporation. For the new cost basis reporting, a corporation must tell us if they are an S corporation or a C corporation. If we do not receive a positive written indication stating that a corporation is a C corporation, we will code the account as an S corporation. Per the Cost Basis Rules, S corporations will be subject to 1099-B reporting.

Please note that Thornburg Investment Management offers no tax, investment, or sales advice. We recommend you discuss your specific situation with your tax advisor and financial representative. We understand that the new cost basis rules are complex. To help with the rule changes and the letters we are sending, please feel free to link to the following online resource provided by the transfer agent for the Thornburg Funds:

We appreciate your business. If you require further information, please do not hesitate to contact a Mutual Fund Operations Associate at 800.847.0200, option 0.

Important Information

Thornburg mutual funds are distributed by Thornburg Securities Corporation.

Thornburg Investment Management, Inc. mutual funds are sold through investment professionals including investment advisors, brokerage firms, bank trust departments, trust companies and certain other financial intermediaries. Thornburg Securities Corporation (TSC) does not act as broker of record for investors.