Tax Question: Cashing in a Mutual Fund

[JanetRose]

We brought into a mutual fund from 1992 to 2005, purchasing $2609 worth of funds over time.

We cashed it in 2005, receiving back a total of $4801.

Wouldn't I claim $2192 in gains (difference between buying and selling prices)?

I am hoping it is that easy!

Thank you.

 

[Toby'sFriend]

no, The amounts you held for over 3 years will be taxed as long term capital gains and the amounts that you held for under two years will be taxed as short-term.

So you need to divide it into those two groups.

 

[Jimbo]

Over the time you held the fund, it undoubtedly paid out dividends and capital gains. If so, you would have paid taxes on these distributions in the years that they were made. If you didn't reinvest, and instead took the distributions in cash, your cost basis is $4081 - $2192.

But if you had these distributions reinvested (as most people do), you were buying more shares through the years. If so, your actual cost will be $4081 - $2192 plus all the reinivested distributions through the years. And your taxable gain will be decreased accordingly. If you don't take this into account you'll be paying taxes a second time on those distributions.

If you kept your annual statements through the years, you can figure it out. Otherwise, the mutual fund should be able to give you your cost basis.

 

[JanetRose]

I don't have all the statements but I do know that I paid over $500 in taxes over the years. We did have the distributions reinvested. The account information is no longer available on the company's website.

I think I'm going to take $4081 minus $2192 and claim that - would that be too much of a risk to do?

 

[Jimbo]

It's not a risk, because you're overpaying. Couldn't you contact the fund company and ask for your cost basis?

 

[JanetRose]

Also, the Form 1099-DIV they sent me has no information except for the Date of Sale, Gross Proceeds and Number of Shares. The form indicates that they are unable to calculate the average cost and gain or loss of shares redeemed. Maybe I should take all to a tax person and not do my taxes myself after all!

 

[Ronda93]

Dig out your old returns. There should be 1099-DIVS for every year the fund paid, and you reinvested, a distribution. Add those to your basis. If you PAID $500 in taxes because of these, it's significant. If you paid taxes ON $500, not so much, but it would still save you money to know.

Without the old figures a tax professional can't improve on the figures you have.

 

[ckmommy]

Sorry to hi-jack this thread, but i havew a question as well. I bought a mutual fund in 02. My finacial guy asked me to sell it in Oct 05 and reinvest it in something else. Well, I was going over my tax form from him last night and the finding out when I bought this stock and how much I bought. I am sure that I had asked him to reinvest my capital gains, but when I looked for this info, I found what I bought in 2002, and when I sold it in 05, I had the same quantity that I had purchused in 3/02 ( it had two other small buys in 12/02, but then nothing after that), just gained $900. Could this fund have not given back any capital gains? I never recieve any money from any of my funds.

Thanks for any help.

 

[Ronda93]

It's quite possible that the fund had no realized capital gains to distribute during the time you owned it. For it to pass along gains, the fund has to sell something at a gain. It also has to exceed any losses they carried over from the ugly years. I have some that haven't distributed a gain since 2000. That's not to say they haven't gone up in value. It's either unrealized (hasn't been sold) or still working off the losses of the past.

Re-reading your post. The two small buys in December 02 - did you make those purchases? If not, that's probably the reinvestment of the distributions (common time of year to do it). Either way, those buys are added to your basis.

Good luck.

 

[ckmommy]

Thanks Ronda,

That must be what happened. I went into our turbotax program from last year and made sure that we would still be able to do our own taxes using this program (after buying this year's version). All the forms are there!! It looks like I will owe about $52. I was kind of hoping for a loss--then I would get paid!! Just kidding!!

I am off to buy Turbotax of 2005!! Praying for a good refund!!