– Selling appreciated mutual fund shares that have been owned for more than one year will result in a long-term capital gain, with a maximum federal income tax rate of 20%.
– The 3.8% net investment income tax may also apply. Most taxpayers will pay a tax rate of 15%.
– Gain or loss from selling mutual fund shares is determined by the difference between the amount realized from the sale and the investor’s basis in the shares.
– Certain mutual fund transactions are treated as sales even if they might not be thought of as such, and determining the basis for shares sold can be challenging.
– Sales occur when an investor redeems all shares, directs the fund to redeem shares for a specific dollar payout, or swaps funds within a fund family.
– Writing a check on a fund account with check-writing privileges is also considered a sale of shares. 1. To determine the basis of shares when selling all shares in a mutual fund, add the basis of all shares, including commissions and sales charges, and add reinvested distributions while subtracting any distributions representing a return of capital.
2. If only part of the shares are disposed of, the investor can use the first-in first-out method, specific identification, or average basis to identify the shares sold and determine their basis.
3. Mutual fund investing can result in complex tax situations, and investors should contact a tax professional for guidance. 1. Tax law changes impact small businesses.
2. High income earners face new tax brackets and rates.
3. Deductions for charitable donations increase.
Leave a Reply