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Level 1

If I take $100,000 out of my non IRA mutual funds are there any tax implications other than 2017 capital gains

 
10 Replies
Level 18

If I take $100,000 out of my non IRA mutual funds are there any tax implications other than 2017 capital gains

Without knowing your financial circumstances, impossible to answer.
Level 20

If I take $100,000 out of my non IRA mutual funds are there any tax implications other than 2017 capital gains

Like income from the sale of any other investment, if you have owned the mutual fund shares for a year or more, any profit or loss generated by the sale of those shares is taxed as capital gains. Otherwise, it is considered ordinary income.
Level 1

If I take $100,000 out of my non IRA mutual funds are there any tax implications other than 2017 capital gains

Since I paid capital gains and dividend taxes each year, why do I owe more taxes when I sell the funds?
Level 10

If I take $100,000 out of my non IRA mutual funds are there any tax implications other than 2017 capital gains

(1) Dividends are a separate category of income than capital gains.

(2) Mutual fund capital gains reported on Box 2a of Form 1099-DIV are capital gains incurred by the mutual fund itself on its own transactions.  These are passed on to shareholders. From a tax perspective, this is one of the disadvantages of a mutual fund.  You then have individual capital gains/losses when you sell your shares.  

Why?  Because that is the way tax law is writtten.
Level 20

If I take $100,000 out of my non IRA mutual funds are there any tax implications other than 2017 capital gains

A 1099-DIV reports the taxable distribution of your share of the capital-gains that resulted from the mutual fund's internal trading plus the dividends paid by the stocks held by the mutual fund, essentially the difference between the Net Asset Value of the mutual fund and the value of the stocks still held by the mutual fund.  The distribution is reinvested in additional shares and the NAV is reduced to the value of the underlying stocks, keeping your balance the same as before the distribution.  This reduction in NAV is what keeps you from paying taxes again on this money when you later sell the mutual fund.  However, a mutual fund that has increased in NAV since purchase still has a net embedded gain on the stocks still held by the mutual fund on which you must pay capital-gains tax when you sell the fund shares.  The per-share taxable gain on the sale is the difference between the NAV at which you purchased the shares and the NAV at which you sell the shares.

If capital gains and dividend distributions were not made periodically, the NAV would never be reduced by such distributions and you would end up paying the taxes on the overall gain when you sold the shares instead of paying part of it along the way.
Level 20

If I take $100,000 out of my non IRA mutual funds are there any tax implications other than 2017 capital gains

Level 20

If I take $100,000 out of my non IRA mutual funds are there any tax implications other than 2017 capital gains

Don't see that anyone mentioned it but

If you reinvested the dividends and bought more stock or shares you need to add the dividends to your cost basis so you don't pay tax on them again. A reinvested dividend is really 2 transactions, a dividend and a buy.  You got a Dividend and then you bought more shares.  Same with any Capital Gain distributions.

Level 20

If I take $100,000 out of my non IRA mutual funds are there any tax implications other than 2017 capital gains

Thanks VolvoGirl, I should have mentioned that.  If the reinvestment occurred on January 1, 2012 or later, the shares purchased by the reinvestment will be covered shares and the financial institution will have already factored that into the cost basis reported on the Form 1099-B reporting the sale.  If the reinvestment occurred before January 1, 2012 when cost-basis tracking by the financial institution was not required, you'll have to make sure that you track the cost basis yourself on the uncovered shares.  (Most of the larger financial institutions track and provide you with your cost basis on uncovered shares anyway even though they do not report it to the IRS on the Form 1099-B.)
Level 20

If I take $100,000 out of my non IRA mutual funds are there any tax implications other than 2017 capital gains

Oh, so we don't need to factor that in anymore ourselves when we sell?
Level 18

If I take $100,000 out of my non IRA mutual funds are there any tax implications other than 2017 capital gains

See Table 4.1 In IRS Pub 550 at <a rel="nofollow" target="_blank" href="http://www.irs.gov">www.irs.gov</a> for a description of your record keeping requirements for mutual funds in a regular (ie not tax-deferred) investment account.