topic in Community Basics

Basis for sale of inherited mutual funds after a couple years and mutual fund reinvesting

Matilda — Sun, 29 Mar 2026 23:41:12 GMT

I inherited four American Funds in 2023. I know the basis of the original inheritance. I did not touch them until I cashed them out end of 2025. American funds automatically reinvests so my amount of shares has grown. The 1099B has short term and long term gains for each fund due to the reinvesting. I know that the basis is the date of death value of my mother. Do I apply that basis to the reinvested shares as well even though they were technically purchased later. And are all the shares long term even though the recent ones American funds reinvested in are listed as short term gains on the 1099B.

I think I adjust the 1099B to be all long term with the basis the day my mother died for all shares. But I want to make sure. If this is true - What records would I need to keep for the adjustment. Thank You

Re: Basis for sale of inherited mutual funds after a couple years and mutual fund reinvesting

Hi Palms — Mon, 30 Mar 2026 01:19:16 GMT

It doesn't matter whether or not you touched the funds, the basis is still the fair market value of the shares owned on the date of your mother's passing in 2023.

Any shares that were acquired, in any manner, after that date have a new basis, which would be the value (purchase price or otherwise) on the date they were acquired.

So, you need to keep records of the FMV of the shares owned as of the date of your mother's passing and also the shares acquired (purchased and reinvested) after that date. Also, any shares that have not been held for longer than 1 year are short-term.

Matilda — Mon, 30 Mar 2026 05:03:01 GMT

Re: Basis for sale of inherited mutual funds after a couple years and mutual fund reinvesting

Matilda — Mon, 30 Mar 2026 05:02:10 GMT

So I need to split the mutual fund into separate entries. One for the original inherited shares, then one for each of the times they reinvested and bought more shares for me. (every time the basis is different) The last time being a short term investment.

And I must only put inherited for the original shares because inherited means the basis is set to date of death. This is getting pretty complicated and won't match the 1099B that fidelity provided although I guess the total will. Is there an easier way to do this? I have 4 different mutual funds to do this for.

They put various for date acquired in the 1099-B, then I guess average the basis out over all the shares - end result - total gain - should be the same as separating them by date except the first is inherited, the rest are reinvested.

Re: Basis for sale of inherited mutual funds after a couple years and mutual fund reinvesting

Hi Palms — Mon, 30 Mar 2026 14:45:14 GMT

@Matilda wrote:
So I need to split the mutual fund into separate entries. One for the original inherited shares, then one for each of the times they reinvested and bought more shares for me. (every time the basis is different)

That is correct and it can get complicated or a lot of work and there is really no simple way to handle a situation such as your situation.

Brokerage firms will make the adjustment (if they know) upon death (i.e., marked to FMV on the date of death) and then the shares renivested (which are the result of fund distributions) are "covered shares" and the reported figures should be accurate on the 1099-B. If the firm did not make the adjustment for the date of death, then the total will most likely not be accuate.

Re: Basis for sale of inherited mutual funds after a couple years and mutual fund reinvesting

Matilda — Thu, 09 Apr 2026 01:15:30 GMT

I'm still working on this. I really want to make this easier so - will the following work???

I have a spreadsheet so I have all the information. Luckily its only a couple of years. - but it is also four mutual funds. If only I knew to shut off the dividend reinvestment. My question now is can I just separate into three different categories? Lots of entries for only two years with four funds.

first - The inherited mutual fund info with the date of death basis.

second - For reinvested dividends over a year - combine each mutual fund's reinvested dividend shares and average out the basis for this long term category.

Third - For reinvested dividends less than a year - combine each mutual fund's reinvested dividend shares and average out the basis for this short term category.

I hope I explained this ok. Thank you for your help. If I have to do all the entries for every purchase separately I will do it - I'd just rather not. In December they have three separate purchases per fund on the same day.

Thank You.

Re: Basis for sale of inherited mutual funds after a couple years and mutual fund reinvesting

Hi Palms — Thu, 09 Apr 2026 15:30:55 GMT

I'd say you could do what you proposed as the end result is going to be accurate in terms of gains/losses, which is all they really care about. In other words, provided the totals are correct, you should be OK.