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Level 3
posted Jan 22, 2024 7:16:52 AM

Convert Index mutual fund to Like ETF - tax consequence

Vanguard tells me that I can convert my 500 index mutual fund into a like ETF with no tax consequences. I wanted to ask the community if that was the case where my conversion to a like ETF would have no tax consequences. I'm afraid of converting a really long term holding for fear of getting taxed on the entire amount. Has anyone done such a conversion?

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1 Replies
Level 15
Jan 22, 2024 9:50:04 AM

this is what I found but have not actually been involved in such a situation

Generally the conversion from a mutual fund to an ETF is structured so as not to be a taxable event to shareholders. But if the mutual fund sells investments in its portfolio before the conversion, it may result in a recognition of capital gains for the mutual fund which could lead to taxable distributions to shareholders. If that happens, you may owe taxes on these distributions.