selling mutual fund shares

[zucc57]

I hold shares in a mutual fund which I've had for many (>7) years.  I've not purchased additional shares or sold any in that time.  Preparing taxes each year is very straightforward using TurboTax since the relevant information imports directly into the relevant tax forms.

However, I'm considering selling all my shares later this year.  If I do so, is preparing taxes for 2022 still straightforward, or is it more nuanced, since I read that there are several ways of calculating gains when an asset such as this is sold?  Will TurboTax be intuitive in this case?  Does the typical mutual fund company supply information usable for TurboTax?

Thank you

[jtax]

What's important to know is the cost "basis" for the shares you sell.  You are taxed on your gain, which is the amount you sell for minus your basis.

If the shares were purchased in 2012 or later the fund/broker is required to track that for you and report it on a 1099-B in the year you sell. If so everything should just work. You import the 1099-B and TT figures everything out. (Make sure the 1099-B seems correct of course, like any imported document.) BTW this includes all subsequent purchases such as dividend reinvestment.

If the shares were purchased prior to 2012 the fund/broker might still have the basis info, but they are required to have it. If so import will still work the same, it's just a different checkbook will appear on a particular form and the fund/broker doesn't tell the IRS what the basis is. But they tell TT and TT will use it.

If the shares were purchased prior to 2012 and the fund/broker doesn't have the basis then the basis field will be blank and it will be up to you to figure out and type in the correct value.

Please feel free to ask follow-up questions.

[Hal_Al]

@zucc57  said " I read that there are several ways of calculating gains when an asset such as this is sold"

Not really. In your case, not at all, since you will be selling all shares and there was only one purchase in the past.

People wo make multiple purchases, including dividend reinvestment, and/or multiple sales are allowed to choose among various cost basis methods.  But they must choose in advance of making sales and must stick with the original choice for all sales. 

[zucc57]

Thank you very much.  That is very helpful

[zucc57]

Thank you very much

[zucc57]

Thank you.  please bear with me if the following is a dumb question.

Suppose a person purchases shares in a balanced mutual fund and holds them for 10 years.  Each year that person will pay some amount in dividend income, and some in capital gains tax.

Now that person is selling those shares.  If for example that person purchased the shares at $10 and sold at $15, is the 'gain' on each share $5 for the purpose of paying capital gains tax in the year of sale?  Or is it more nuanced than that, where the capital gains they paid each year somehow has to come into the calculation?

Thank you again

[Hal_Al]

Q.   If for example that person purchased the shares at $10 and sold at $15, is the 'gain' on each share $5 for the purpose of paying capital gains tax in the year of sale?

A. Yes.

Q.  Or is it more nuanced than that, where the capital gains they paid each year somehow has to come into the calculation?

A. No.  Since you did not use those capital gains distributions and dividends to purchase additional shares.  If you had purchased additional shares, those additional shares would have a different cost basis than the original shares. You would be expected to keep track of that cost basis (in most cases the fund does that for you, usually using the cost averaging method)

[zucc57]

Perfect. Thank you so much