Comment on FR Doc # N/A

The Investment Company Institute appreciates this opportunity to provide the Internal Revenue Service (the “IRS”) and the Treasury Department with our comments on the proposed regulations on cost basis reporting, which were released on December 16, 2009. We were encouraged to see that the IRS incorporated many of our suggestions, including recommendations that the IRS leave certain decisions as to communications methods and record formats to the industry to decide. Overall, we feel the IRS addressed many of the relevant issues with rules that are logical and workable. There remain some areas, however, where calculation and reporting issues persist, and further clarification is needed from the government. We discuss these issues in the attached letter. Of these, the most pressing concerns for the mutual fund industry are: • Average Cost. The Institute believes that the IRS should eliminate the requirement that average cost elections be made in writing. We also feel that shareholders should be permitted to switch easily from average cost to another method. • Gifted and Inherited Shares. The Institute strongly feels that Congress did not intend for these shares to be covered by the basis reporting rules. If the IRS insists that they are covered, the default rules in the proposed regulations must be made more administrable. • Flexibility for Transfer Statements. Brokers should have maximum flexibility with respect to transfer statements, including the information required on such statements. • February 15 Reporting Deadline. The extended deadline should apply, as Congress intended, to any form that brokers send to mutual fund shareholders. We also will discuss these issues at the public hearing on February 17; an outline of our comments for the public hearing also are attached. Given the short time frame before the cost basis reporting requirements become effective, the Institute urges the IRS and Treasury Department to issue final regulations on these issues quickly. Implementation of the new requirements will take significant time to build and program the necessary systems, to test the systems to ensure they are functioning properly, and to communicate with customers about basis calculation methods. The mutual fund industry has been working on these issues since the legislation was enacted in 2008 and has made significant progress in many respects; however, they cannot begin the lions’ share of the work until regulations have been finalized. The Institute appreciates the opportunity to comment on this important regulation project. We look forward to discussing these issues further at the public hearing on February 17. In the meantime, should you have any questions, please contact me at (202) 371-5432 or kgibian@ici.org. Sincerely, Karen Lau Gibian Associate Counsel – Tax Law