Form 1040 - Sale of Mutual Fund

dadoesFebruary 12, 2004

I sold all my shares in a mutual fund in September 2003 that I had held since 1996. I've always done my own tax return, and don't know how to handle this transaction. I know it's reported on 1040 Schedule D.

The 1099-B reports the total $-amount of the sale, but as I understand it, that's not the amount on which capital gains tax is calculated. I have a record of all the individual share purchase transactions through the years. How do I figure the cost-basis? Are the $-amounts of each purchase simply added up, and then the gain (or loss) is the difference between that total and the final sales figure from the 1099-B?

The sale proceeds were immediately rolled over into another mutual fund. Is this considered a 'wash sale' for purposes of not being able to deduct a loss, as described in the instructions for Schedule D?

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Let me see if I can help.

First, this is not a wash sale unless you buy shares of substantially the same mutual fund. Normally, unless you bought shares of the same fund, you do not have wash sale.

I am assuming that this is the first time you have sold any shares of this mutual fund. If you have sold shares previously, let me know.

Captial gains are calculated on the difference between your selling price and your basis. Your basis is your investment in the stock. Add up all of your purchases and dividend reinvestments and that will be the basis in the stock. If you have held any of the shares for less than 1 year prior to the sale, those shares are a short term capital gain/loss. All of the share that you held longer than a year are long term. You will need to separate the long term gains/loss from the short term gains/loss.

Hope this helps.

Joan, your friendly tax person

    Bookmark   February 12, 2004 at 10:04PM
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Thanks for the info!

The new fund is not the same one. Not even in the same company/family of funds.

No shares had been previously sold.

There were a few shares purchased from dividend reinvestment that are less than 1 year. I haven't looked closely at Schedule D yet, run some test numbers. It sounds simple enough -- add up the purchases older than one year, add up the purchases less than one year. I assume the instructions for Schedule D and/or the capital gain tax calculation will determine what portion of the selling price applies to each part.

    Bookmark   February 12, 2004 at 10:35PM
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Calculating the long term portion of your sale vs. the short term portion is easy. Figure out how many shares are considered as part of the short term sale. Divide the gross proceeds from the sale by the total number of shares, long and short term. Then multiply the result of that calculation by the number of short term shares and you will have the proceeds from the short term sale. everything else is long term.

Joan, your friendly tax person

    Bookmark   February 13, 2004 at 7:33AM
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One more question, then I think I'm done. :-)

There were twenty-one share purchases through the seven years of holding the fund -- one initial purchase, then 20 more from dividend reinvestment (some were fractions of a share). Is each purchase listed separately on Schedule D, with a proportional part of the sales amount attributed to them?


    Bookmark   February 15, 2004 at 4:54PM
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Nope, you can lump together the short term sales and the long term sales. Use various for the purchase dates on both sales. The IRS wants to see the actual sale date though.

Let me know if you have any other questions.

Joan, your friendly tax person

    Bookmark   February 15, 2004 at 5:42PM
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