Cost basis regulations and you - Fidelity Investments

Cost basis regulations and you

A guide to help you understand the IRS reporting requirements

Introduction

The Emergency Economic Stabilization Act of 2008 contained new requirements for brokerage firms and mutual fund companies regarding customer statements and Internal Revenue Service (IRS) reporting. Specifically, brokers like Fidelity are now required to report adjusted basis (often referred to as "cost basis") for "covered securities" on the IRS Form 1099-B part of the Fidelity consolidated tax reporting statement, if applicable, and to indicate whether the holding periods of disposed securities were short or long term in nature.

The objective of these requirements is to help ensure that investors accurately report gains and losses of securities in their annual tax filings. While Fidelity bears the responsibility of compliance with these new reporting regulations, these requirements may also have meaningful implications for how you handle your tax reporting.

These requirements apply to holdings that are identified by the IRS as covered securities. They are being phased in over a four-year period which began on January 1, 2011. The implementation schedule below identifies which securities are covered and when.

2011

Stock in a corporation purchased on or after January 1, 2011

2012

Securities eligible for average cost (mutual fund and DRIP), purchased on or after January 1, 2012

2014 and beyond

Options, fixed income, and other securities as determined by the IRS, purchased on or after January 1, 2014

Your tax reporting obligations

It is important to note that your tax reporting obligations have not changed. The expanded reporting requirements imposed on broker-dealers and mutual fund companies do not mitigate your responsibility to accurately report capital gains and losses in their annual tax filings. Taxpayers must continue to complete Schedule D and accurately report cost basis for short-term and long-term capital gains and losses.

There may be instances when the information you report to the IRS will differ from the information reported by Fidelity. The information that Fidelity reports to the IRS will be based on our knowledge of transactions occurring in a specific account. On the other hand, taxpayers are responsible for reporting realized gains and losses based on their overall financial situation.

What is reported

Fidelity is now required to report the following to the IRS when a covered security is sold: ? Adjusted cost basis ? Holding period (long-term or short-term) ? Wash sale information

Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, in the Fidelity consolidated tax reporting statement now reports cost basis information for covered and most noncovered securities. In addition, please see the supplemental realized gain/loss sections of the tax statement for additional cost basis information concerning disposal of certain securities, including fixed income securities with an adjusted basis, options, and securities purchased or sold in a foreign currency. Please note that Fidelity will not report cost basis information for noncovered securities to the IRS.

Here's a sample of what IRS Form 1099-B will look like for tax year 2012:

1 Specific pages for holding period and reported or not reported*

2 Date of sale or exchange 3 Date security was acquired 4 Quantity sold

5 C ost basis of sold or exchanged shares 6 Gain or loss on the instruments 7 Wash sale loss disallowed 8 Subtotals by position as well as by holding

period and reportability

2012 TAX REPORTING STATEMENT

John Q Public

Account No: 123-456789 Recipient's ID No: ***- **- 6789

Customer Service: 888-888-8888 Payer's Fed ID Number: 04-3523567

1 FORM 1099-B* 2012 Proceeds from Broker and Barter Exchange Transactions

Copy B for Recipient OMB No. 1545-0715

Short-term transactions for which basis is reported to the IRS--report on Form 8949 with Box A checked and/or Schedule D, Part I (i)

(This Label is a Substitute for Boxes 1c & 6)

2 3 4 8 Description, 1d Stock or Other Symbol, CUSIP

5 6 (IRS Form 1099-B box numbers are shown below in bold type)

Action

1a Date of 1b Date of

1e Quantity

2a Sales Price

3 Cost or

Gain/Loss (-)

Sale or

Acquisition

Sold

of Stocks,

Other Basis (b)

Exchange

Bonds, etc. (a)

7

5 Wash Sale Loss

Disallowed

4 Federal Income Tax

Withheld

13 State

15 State Tax

Withheld

COACH INC, COH, 189754104

Sale

03/15/2012 02/12/2012

Sale

03/15/2012 03/12/2012

Subtotals

153.259 22.223

30,452.25

28,452.25 (k)

2,000.00

2b - Loss based on above amount in 2a is not allowed

6,258.29

6250.25 (e)

8.04

36,710.54

34,702.50

8 FIDELITY ASSET MANAGER 20%, FASIX, 316069400

Sale

03/13/2012 Various

200.000

2,125.23

2,000.00

125.23

UNITED STATES TREAS NTS 4.25000% 11/15/2014, 912828DC1

Sale

03/15/2012 02/12/2012

153.259

Sale

04/15/2012 03/12/2012

22.223

Subtotals

30,452.25 6,258.29

36,710.54

28,452.25 6,250.25

34,702.50

2,000.00 8.04

60.00 CA

5.00

ZHONGPIN INC COM, HOGS, 98952K107

Sale

05/05/2012 04/13/2012

43.225

147.83

TOTALS

75,694.14

Box A Short-Term Realized Gain

Box A Short-Term Realized Loss

Box A Wash Sale Loss Disallowed

153.44 (f) 71,558.44

-5.61

4,141.31 -5.61

2.23 60.00

2.23

*This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determines that it has not been reported.

Dattee and EnvelopeNNumumbebrer

Page 2 of 18

2012 TAX REPORTING STATEMENT

John Q Public

Account No: 123-456789 Recipient's ID No: ***- **- 6789

Customer Service: 888-888-8888 Payer's Fed ID Number: 04-3523567

2012 TAX REPORTING STATEMENT FORM 1099-B* 2012 Proceeds from Broker and Barter Exchange Transactions

Copy B for Recipient OMB No. 1545-0715

Short-term transactions for which basis is not reported to the IRS--repJoorhtnoQnPFubolricm 8949Acwcoiuthnt BNoo:x B1c2h3-e4c56k7e8d9 and/or ScheduCluestDom, PeraSretrIvi(cie): 888-888-8888

(This Label is a Substitute for Boxes 1c & 6)

Recipient's ID No: ***- **- 6789

Payer's Fed ID Number: 04-3523567

(IRS Form 1099-B box numbers are shown below in bold type)

8 Description, 1d Stock or Other Symbol, CUSIP

2012 TAX REPORTING STATEMENT ActioFn ORM1a D1a0te9o9f -B*1b D2at0e1of2 Procee1desQufarnotitmy Broke2ra Saanleds PBricaerter Exc3hCaonstgoer TraGnasina/Lcostsio(-n) s 5 Wash Sale

Sale or

Acquisition

Sold

of Stocks,

Other Basis (b)

Loss

C4opFyedBefroarl Recip1ie3nt OMB N1o5. 1S5t4a5te-0715

Income Tax State

Tax

Long-Etexcrhmantgreansactions for which basis is reportedBtoondths,eetIcR. (Sa-)-report onJoFhnorQmPu8b9li4c9 withABcocoxunAt Ncho:ecke12dD3ias-4an5lld6o7w/o8er9dSchedulWeiDth,hePldaCrtusIIto(mi)er ServiceW: ith8h8e8ld-888-8888

COA(CTHhisINLCa,bCelOisHa, 1S8u9b7s5t4it1u0te4for Boxes 1c & 6)

Sale

03/15/2012 02/12/2012

153.259(IRS

Form

1099-3B0,b4o5x2.n2u5mbers

are

sh2o8w,4n52b.e2l5ow

in

bold

Recipient's ty2p,0e0) 0.00

ID

No:

***-

**-

6789

Payer's Fed ID Number: 04-3523567

*The example shows a form dedicated to short-term transact2io0ns1f2orTwAhiXch RbaEsiPs iOs rRepToIrNtedGtoStTheAIRTSE. TMheEreNaTre additional pages that cover sales or FUZSSSSSTSSIHOaaaaaNDuulllllOTIeeeeeETbbATSSSSS8CUZANLEttSSOHLaaaaacooONGIDDTuutlllllSttOTeeeIeeiAPeaaYoTbbSAsNCIllnEC8FUA(SSSSttLFNssTAcTooLGHSIDcaaaaONroADSDhttSO00000IitullllPaapNIieeeeTAiSIen33345ESoTsbNlltICEs/////ssCiREnNL8CAPgETToF11110tLCcSoITHnAca53555DOaC-rTr000E001SDIMO,tittr,N/////abTp53343aTaYiMAxa22222OteCIeoS1Net/EC////nlcRl00000IsRCniD01111sOeMArdTAlohcCS11111o1sE55555mHiaCNAnSHrao,sr22222M10E000SS,/////aiA0t,Tp2n2222THOArSa3333Ie,IxaCtaIcSN1toR0g0000Et////9G1cEOliMaD1111Ooeodrtc1e1111SC1h8ESNTsE5i5539GnafkS1Ea,22222Hauoo9,0V000SA0////,TRatTHnaMaxSn2222b-ro7C3234,eantS1Spc9RlBog0000srO5////,1sDerOA2d1111hpsotice1111498EON9o4ia0aGN2223aHroftk*000001A2222S189uou.A%tTft////ncr-2A333S33be,hc0222297ottposSgBSoe5/////t1q,Ge,0000455rro11111Deric0i8u1111r924aNfoO4f55555E*Fko0a92iw2222K8000V1A1tS./////sTARnetr02t722222o223b90h1acie0ySthS%55Br00000s///54(eqi0rm2111oDi40o1i11111OIo)2iru7o4A102X222nc1b0f1f11111axK(iSu.tb2%c///so,0T2BBBho001eht222s1qyei34e5hl%/tsD,r000ooo,01m1iuP1roi0bo111sxxxaC75i1Fw6ns02Sb1f000ta/rcLUBBBAi0eBBB0o21ythsoai6S%Sl0moooo/&Po,1SSWbii91nxxxIIfcCcsbe5XP4hhr41a6ol/AAAhUe0,ooo,12is)lis0,3s11S9rr/0ehLLWc1bttC122405111Ia--5oonPd622303TTSee2aU4a/nnS0.....o8ee2a,ssS22202Qes11gg6u2rr0l9ht22205Ii42255emmb9u--dP8111s33509TT32233rfSs4aD4Le2esSee.....rtRR0na,i22222i8oC1trrQsopo0113tl9uee222552mmsiee1ftl2550t1ouaa53399d8ysmenr2330Q2La(llDrRRSiioID....of8nzzoRt2220uoCeeo(eee2timsta2550rSBIisaal1StddR8ddsn3990yBarllDoFiiStreGLlozzDiltltoBCdooxeeyopoFaires1ddwsmiokronsatsreoGLhmrl3B337e21ld1ot6160o664aaoke0cres1,,,,,,,iwn920247761nSed0s&Id9oa56551124eR33733a9rBs-f280820097d6600366t9lBn,6eSSao........o,,,,,,,-aB222255182e)1224s4577nBtdbS90954413aoot45555611andotocP333cbna78822800hsfS.nxrBkd60306odlo,........Sei(ae82222955scdn,,,,,xsfaes24147tl,39e955144,aueSo)tBn55851IctePmscRtur82020h.otkramcPbt.....(icSes22025c.aeerkrb,7e95054i()-3rscttea0rs-,43eeer)r,2Os4741ae2Er8rJ9075rm668tap4oeh8203x,,,rE5h224o9e6e..2.s4542nc5554ri23r632.Ohxss4054.3002t054B69482QoOhhtc....0,oh((((,,,,3a5wCu222o071t2574ccch.aPeh4shw5550n20no55505n))))(ier7ug22n52sns30822a3kbr0BbF)2688.t.....3(((5ebg2B42452lnn,,,,abCohhio4244c0le.45405asoC)r)o)5eo6555rglsiowm0sos0022wiwesst....T((i0222tnnboc(8i0555nbor)rT);b9)ra24obrGr4AR,,nelao011dca9elp032cinscd--nto0688055owiy422p/astu.......GLp,,,ryG0200266ii000entoeptcaa0844011100anths)--eoic55t88i600ntNsn)'n22isB......./o/t6600000Lo(,,L007-iI:oF1144800oDo)o002nsxso0080sNnssr....B0000mo((1s--0040:)2)c*38*h*-594-eW45D*c*69i22-kas75...65ase822h7lW9D33dlWDLo8Si22oaw9siaas..aass22esanlhsleh33dllLoldLoSowSo/wasosealesesdlredSIcnhCc664Weo00oIF..dmnpi00Itenycuh004e66Wdoclh4BC00WeeFTomie..orFtea0m0filhaoeDptddex00hhlreydeTC,PheRCreBaTAPleaaerduxaSllyfacasdoxetlitCarpror1tt'SiRAms3eeItSenFeaI1cttrte(ae3iO1pdSit)e3iMeeIDrnBvtiNcON5euW1Mo.:m05.iBt0b1hSe55Nh8WtTr1.a4e8:o0a55tl8i0.d0etx-h-41S08h-5T78tW3e1a4a185l5t5id-x5e2t-8hS308h57Tt8ea61a8ltd75ex

terxacnhsaancgtieosnsthfaotr awrhe:icshhobrats-itserismnfootrrwephoicrhtebdasainsdistnhoettreerpmoirsteudn;klnoonwgn-t.erm for which basis is reported; long-term for which basis is not reported; and *This

is

Sale Sale 04/150/32/01152/201203/1U2/n2k0n1o0wn

imSpuboStrSoatatulaebnlsttottaalxs

03/15/2012 information

Unknown and is being

221.5232.3259 22.223

furnished to the

Internal

63,20,5485.22.925 R3e6v3,e766n,,1720u15.e085..452S49ervice.

6U,2n5kn0o.2w5n UI3fn4yk7oUn0uon2kw.a5nnro(ecw(c)nr)equired

to

8.04 file a

return,

a

negligence

60.00 penalty

CA

5.00

other

sZSTaHOanlOTecANtFSiLGoIaDSlnPeEILNmIT0IaNY5yC/A0b5SC0e/3S2O/i0E1Mm1T3,2/p2MHo0AO1sN2Ge0AdS4G/,1oE9U3n8R/n29ky205no012o%0uKw1,ni0fF7tAhSisIXi,n3c1o60m6e944i302s.002t02a.50x0a0ble

and

the7I6R,712S,44187d2..e598t.132e3rmines72th,0a1tU81in.t45k4hn3o.a(4cws4)nnot

been

reported. -5.61

2.23

60.00

*This is iUmNpIToErtDanStTAtaTxESinTfoRrEDmAaStaetNiaoTnnSd E4a.nn2vd5e0lio0s0pB%bNoeux1im1nB/gb1Le5fro/u2n0rgn1-4iTs,eh9r1em2d8R2teo8aDtlCihz1eedInGtaeirnnal Revenue Service. If you are requi4r,e7d36t.o08file a return, a negligence penalty Page 3 of 18

Default disposal methods

When only a portion of a position is sold, the tax information that Fidelity reports to the IRS may depend on which underlying "tax lots" are actually sold. For example, you may accumulate a position in a particular security over time, buying smaller quantities at a variety of different prices. A tax lot is a record of the amount, price, and date of each of these purchases. If you were to sell some of that position, the tax implications--the capital gain, holding period, and tax rate--may depend on which of those lots are sold. Unless you specify otherwise, Fidelity's default cost basis methods are as follows:

Securities

First In First Out (FIFO). Securities are sold in the order in which they were acquired. That is, the first securities bought are the first ones to be sold.

Mutual Funds

Average Cost. Like FIFO, Average Cost assumes that the oldest lots are sold first. However, the cost basis will be the same for all noncovered shares.

Alternatively, account owners or their investment advisors can instruct Fidelity to determine the cost basis for securities, including shares of open-end mutual funds in nonretirement accounts, in one of two ways: 1) setting up their accounts with one of our 11 tax lot disposal methods available to investors and converting cost basis for mutual funds from average cost to lot-level accounting, or 2) identifying specific tax lots to sell at the time of a transaction (available to clients who have previously converted from the average cost method to a lot-level method).

Fidelity alternative disposal methods In addition to the Fidelity defaults of first in, first out (FIFO) for securities and average cost for open-end mutual funds, we offer the following disposal methods for client accounts: ? Highest Cost ? Highest Cost Long-Term ? Highest Cost Short-Term ? Intraday First In, First Out ? Last In, First Out ? Lowest Cost ? Lowest Cost Long-Term ? Lowest Cost Short-Term ? Short-Term Tax Sensitive ? Tax Sensitive

To change your default disposal method, contact a Fidelity Representative at 1-800-544-6666. To learn more about these disposal methods, go to Update Accounts/Features > Cost Basis Information Tracking > Learn More About Cost Basis.

Mutual fund bifurcation

For those accounts in which Average Cost is the disposal method for mutual funds, Fidelity is required to track and report holdings of noncovered and covered shares separately. That is, Fidelity will display separate average cost calculations for fund shares bought before and after January 1, 2012.

Cost basis for covered subposition will be reported to the IRS

Cost basis for noncovered subposition will not be reported to the IRS

For illustrative purposes only.

When using the Average Cost method, gains or losses are defined as short term or long term based on the assumption that the oldest shares are sold first, even though the average cost is the same for all shares. Cost basis for covered lots is reported to the IRS; cost basis for noncovered lots will not be reported to the IRS.

Specify shares

Regardless of which default disposal method you choose, you also have the option to override your default when you place your order to sell by clicking the "Choose Specific Shares" checkbox on your order ticket.

For illustrative purposes only.

You may also override your default disposal logic at any point until a trade settles, by contacting Fidelity at 1-800-544-6666.

Other provisions of the rules

? Wash sales. A wash sale occurs if you sell shares at a loss and buy additional shares (even in another account) of the same or a substantially identical security within 61 days of the sale: the day of the sale, the 30 days before the sale, and the 30 days after the sale. The wash sale rule is intended to prevent an investor from obtaining the benefit of a tax loss without materially reducing economic exposure to the investment.

? Tax mailings. Effective January 2009, we now mail (1099) consolidated tax statements by February 15, instead of the previous January 31 deadline. The cost basis regulations extended this deadline.

? Transfers between accounts. When shares are transferred, adjusted cost basis and holding period will accompany the transfer instructions for covered securities.

? Retirement accounts. Cost information for retirement accounts will not be reported to the IRS. Fidelity provides cost information for positions in retirement accounts as a courtesy to help customers estimate and track the change in market value of each position. This information is not to be used for tax reporting purposes.

? Corporate accounts. Cost information for S-corp accounts is now reported to the IRS. This includes gross proceeds for sales of all securities, as well as cost basis reporting for sales of covered securities.

? Gifted or inherited securities. For gifted or inherited securities, the original acquisition date determines whether it is covered or noncovered. If the original acquisition date (not the date of the gift or inheritance) for a security is after the effective dates, they will be considered covered. If the original acquisition date for a security is before the effective dates, they will be noncovered.

? Short sales. For short sales opened in 2011 and later, Fidelity reports short sales on Form 1099-B in the year the position is closed instead of in the year the sale is made.

The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Fidelity does not provide legal or tax advice. Fidelity cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Fidelity makes no warranties with regard to such information or results obtained by its use. Fidelity disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation. Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917 634708.2.0

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