Which statement regarding the basis of mutual fund shares is TRUE?

When determining the basis of mutual fund shares, option D is valid because it encompasses multiple dimensions of the ways in which mutual fund shares can be evaluated for tax purposes.

To break it down:

First, if an investor has purchased mutual fund shares at various times and prices, using the average basis method is indeed applicable and widely accepted. This method averages the total cost of all shares purchased to determine the basis for tax reporting purposes. This is particularly useful for mutual funds because they often have multiple purchase transactions, making it complicated to track the basis of individual shares.

Secondly, the average basis can indeed be calculated using the single-category method, which is one way to simplify the accounting for shares held in a mutual fund. This method allows investors to aggregate purchases into a single category, streamlining the process of calculating gains and losses.

Finally, the basis for mutual fund shares can generally be determined similarly to the basis for other securities, as both fall under the same capital gains tax regulations which require that the basis be calculated appropriately to ascertain the correct gain or loss upon sale.

Given these points, the assertion that all of these statements are correct highlights the flexibility and clarity provided in accounting for mutual fund shares versus other types of securities, ensuring compliance with IRS regulations