Simple question about selling stocks/mutual fuunds

[gregintenn]

Let's say I have a mutual fund account valued at 100k. Counting investments, reinvested dividends, etc., I've paid 50k for it. The amount I'd owe taxes on if I liquidated it would be 50k, right?

Now lets say I sold 60k of it. Would I pay taxes on 10k, 50k, or how does this work?

[kittensaver]

This is not a simple question. It depends on how long you've held it, how much it has appreciated, if and how you've reinvested the dividends, how it is held/titled and in what tax bracket you (or the holding entity) finds itself.

There is no neat, clean one-to-one correlation here. There are several moving parts.

[ken a.k.a OMK]

Capital gains can be more complicated then that. You reinvested dividends. Did you pay tax on yearly dividends? Short term and long term investments are taxed at different rates. I'm not a financial guy, and hopefully you'll get good answers. I did capital gains once and it was a night mare. I recently talked to my mutual fund adviser and learned that a few years ago they started giving info on capital gains after a sale. They send a form to the IRS and you. So you just have to claim what they report.

[gregintenn]

Mar 16, 2016 16:12:50 GMT -5 ken a.k.a OMK said:

Capital gains can be more complicated then that. You reinvested dividends. Did you pay tax on yearly dividends? Short term and long term investments are taxed at different rates. I'm not a financial guy, and hopefully you'll get good answers. I did capital gains once and it was a night mare. I recently talked to my mutual fund adviser and learned that a few years ago they started giving info on capital gains after a sale. They send a form to the IRS and you. So you just have to claim what they report.

I pay capital gains and dividend tax yearly. I would assume these amounts would be counted the same as the after tax dollars used to purchase the investment. Would that be wrong?


I didn't realize you'd get a form. Several years ago, I sold some single stock, and had to go back and calculate my basis manually; or at least that was my understanding of how to do it. The IRS was o.k. with it.

[gregintenn]

Mar 16, 2016 16:09:35 GMT -5 kittensaver said:

This is not a simple question.It depends on how lo ng you've held it, how much it has appreciated, if and how you've reinvested the dividends, how it is held/titled and in what tax bracket you (or the holding entity) finds itself.

There is no neat, clean one-to-one correlation here. There are several moving parts.

Well, that brings on another question. This has been purchased in equal monthly increments. If you sell part of it, do you sell the longest held part first? The newest first? Do you get a choice?

[resolution]

There are several cost basis methods you can choose between when selling mutual funds. If you have tracked individual share purchases, you can select the ones that you want to sell and your gain would be calculated based on what you paid for those individual shares.

Some people use a first in first out, where you are selling them in the same order they are purchased or an average value that just uses the average cost basis. Most brokerages should track it for you using a few different methods and let you swap between them, if you haven't been tracking them individually on your own.

www.bogleheads.org/wiki/Cost_basis_methods

[kittensaver]

Mar 16, 2016 16:26:16 GMT -5 gregintenn said:

Mar 16, 2016 16:09:35 GMT -5 kittensaver said:

This is not a simple question.It depends on how lo ng you've held it, how much it has appreciated, if and how you've reinvested the dividends, how it is held/titled and in what tax bracket you (or the holding entity) finds itself.

There is no neat, clean one-to-one correlation here. There are several moving parts.

Well, that brings on another question. This has been purchased in equal monthly increments. If you sell part of it, do you sell the longest held part first? The newest first? Do you get a choice?

See resolution's post.

[gregintenn]

Thanks everyone!