I suspect that you or your dad misunderstood what the CPA said. If that's really what the CPA said, your dad needs to find a more competent CPA.
The dividend and capital gains distributions are from transactions on the components within the fund. On these distributions you paid taxes and reinvested the proceeds by purchasing additional shares in the mutual fund, with the amount reinvested becoming part of your basis in the mutual fund. (Note that the reinvestment of dividends and capital gains results in no net change in the total value of your shares. The increase in the number of shares is exactly offset by a reduction in the Net Asset Value of the shares.) Each reinvestment adds to the cost basis that was your original purchase price of the shares and increases the number of shares that you own.
The taxable amount of the sale of the shares is then the proceeds from the sale minus the basis. The sales are broken up into short-term and long-term, with the short-term shares being those that were purchased by the reinvestment of the dividend and capital gains distributions within one year of the sale. Short-term gain is taxed at ordinary income tax rates and long-term gains are taxed at long-term capital-gains rates. In other words, the taxable gain or loss will be the difference between what you sold the shares for and what you paid for the shares.
The reporting will be in up to four categories: Short-term covered shares for which Fidelity knows the cost basis, short-term uncovered shares for which Fidelity does not know the cost basis, long-term covered shares for which Fidelity knows the cost basis and long-term uncovered shares for which Fidelity does not know the cost basis. For the covered shares, Fidelity will have reported the cost basis. For the uncovered shares, if any, you may need to determine the cost basis yourself, particularly if the previous brokerage did not provide this information to Fidelity upon transfer of the shares to Fidelity. The sale of each category must be entered separately into TurboTax.
Review your entry of the Form(s) 1099-B and the results on Forms 8949 and Schedule D to see if your filed tax return correctly shows taxation of the net gains or losses on your short- and long-term shares.
