Level 5

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Cost basis

Forum|Forum|4 years ago
February 7, 2022
3 replies
20 views

I plan on transferring mutual fund proceeds from different mutual fund companies into one mutual fund company.

I realize there will be tax consequences when the fund are sold. I am trying to evaluate or get an estimate, at a high level of the capital gain or loss before I do this. I am not financial savvy, so I am requesting some input.

For some funds, I have both a covered cost basis amount as well as a non covered cost basis amount.

If for a fund that that has an account value of 50k and covered cost basis of 45k and non covered cost basis of 6k would I have a capital gain of 1K ? Do I add the covered to the non covered cost basis and compare that to the account value.

I realize there are likely other tax implications but I just wish to get an approximate idea of gain or loss at this level.

Thanks for reading this.

Best answer by dmertz

Just because the shares are uncovered shares doesn't mean that the mutual fund company is not tracking the cost basis. In this case is seems that the cost basis of the uncovered shares is $6k. If the $6k figure is correct, adding that to the $45k of cost basis for the covered shares gives a total cost basis of $51k. With a current value of $50k, you have a $1k capital loss.

You only have a realized gain or loss if you sell the shares. If you move the shares in-kind, you don't realize the loss and your current cost basis transfers to the new mutual fund company. Of course if you are changing mutual funds, that involves selling the old funds (realizing the gain or loss) then using the proceeds to buy the new fund.

Presumably these mutual funds are not held in a qualified retirement account where the rules are different.

fanfare

Level 15

uncovered just means you bought those shares before 2011.

You need your own records to know the cost basis for those shares.

covered shares means the fund knows your cost and it will appear on your 1099-B statement.

if you can't see your covered shares' cost basis you should contact the fund for assistance to know what it is.

gain = proceeds - cost basis.

J

Jonathan1Author

Level 5

Thank you Fanfare. I appreciate your reply.

Would I be correct in understanding that even though the mutual fund company is providing an uncovered cost basis amount for my holding - that the amount they are indicating on my statement is really an estimate based on some formula in order to derive an approximation of the non-covered cost basis amount?

D

dmertzAnswer

Level 15

Just because the shares are uncovered shares doesn't mean that the mutual fund company is not tracking the cost basis. In this case is seems that the cost basis of the uncovered shares is $6k. If the $6k figure is correct, adding that to the $45k of cost basis for the covered shares gives a total cost basis of $51k. With a current value of $50k, you have a $1k capital loss.

You only have a realized gain or loss if you sell the shares. If you move the shares in-kind, you don't realize the loss and your current cost basis transfers to the new mutual fund company. Of course if you are changing mutual funds, that involves selling the old funds (realizing the gain or loss) then using the proceeds to buy the new fund.

Presumably these mutual funds are not held in a qualified retirement account where the rules are different.

J

Jonathan1Author

Level 5

Thank you. Yes, I plan to move the taxable proceeds to another company and the proceeds from this taxable event will be invested in a taxable fund at another mutual fund company.

I appreciate your response.

Y

Yirmoma

Level 2

Why don't your tools ask for the right information to calculate cost basis?

You overcharged me $6,400 to pay the IRS in capital gains last year, that I shouldn't have paid because your system doesn't calculate it correctly I only asking for the a few of the forms and none of the supplemental information. Now you won't give me a refund after I had to pay someone else to do my taxes right since TurboTax is broken? What the heck! What happened to that 100% guarantee... Typical lies from the typical big corporation that doesn't care about me.

N

NCperson

Level 15

@Yirmoma - let's walk this back a little bit.

Turbo Tax is a 'do it yourself' program. YOU and only YOU are responsible for the data entry!

if the data entry is wrong, the end result is going to be wrong. The Turbo Tax guarentee does not cover errors caused by incorrect input.

if the data entry is correct, but the calcu;ations are wrong, which will mean the end result will be incorrect, the Turbo Tax guarentee will pay any interest or penalties that result.

The guarentee does not cover the actual tax deficiency in ANY CIRCUMSTANCE.

The 100% guanentee is that they will pay 100% of any penalties and interest caused by their software calculations being incorrect.

what did Turbo Tax calculate incorrectly that caused the $6400 situation? or did you enter something incorrectly?

Y

Yirmoma

Level 2

I filled out the boxes as they told me to fill them out from the forms they told me to fill in and that made me pay a cost basis on the entire value of the stock not the correct cost basis cuz there was nowhere for me to enter the cost basis correctly in the process they had available for the options that I had so no I didn't enter it in error, but thanks for putting it back on me since TurboTax is like God and makes no mistakes?

They wanted me to pay $18,000 this year and when I called they're like yeah looks good to us we're not going to help you with anything if you filled the forms out correctly on the website which I did 10 times to make sure I didn't have errors.

The product is broken when it comes to cost basis and stock sales and I told the company this and they don't care. They told me to pay someone more money. Go fly a kite before you come back here and tell me I **bleep**ed it up.