Mutual Fund Capital Gain/Loss

[Bali Hai Again]

What is the name of your state? NY

Four years ago I bought a mutual fund stock for $5k. The value was $9k at the end of 2021. Then came 2022 and now the value is $7500. I have not added or withdrawn any money and all dividends are reinvested. I get a 1099 DIV each year and pay taxes on it.

I want to sell this fund this year. When I go to the brokerage account and select sell all shares, it informs me that the Gain/Loss is minus $500. I am assuming that my cost basis has increased due to the dividend reinvestments.

So, if I decide to completely sell this fund, I am assuming that I will receive $7500 and I can report a loss of $500 reducing my income for that amount on this year’s taxes. I using round numbers above.

Does this sound correct?

As always, any advice is greatly appreciated.

Thank you in advance.

 

[Taxing Matters]

I don't know if the figures you are getting from the web site reflects tax gain or economic gain. The two are not always the same. You'd need to determine what the tax basis in the fund is to know what amount of taxable capital gain/loss you would have.

 

[adjusterjack]

Could the $500 be a year to date change based on 2022's closing balance?

 

[Bali Hai Again]

Could the $500 be a year to date change based on 2022's closing balance?

The year to date change since 6/30/2023 was +$1000 and increased slightly since then.

Edited for date.

 

[Bali Hai Again]

I don't know if the figures you are getting from the web site reflects tax gain or economic gain. The two are not always the same. You'd need to determine what the tax basis in the fund is to know what amount of taxable capital gain/loss you would have.

The rep I talked to just said the $500 would not be taxed. I could not get an answer from them regarding tax gain vs economic gain Or if the $2k above the original $5k invested would be taxed or not.

 

[adjusterjack]

Could you have reinvested $3000 worth of dividends to bring your basis up to $8000 resulting in a capital loss of $500 if you realize $7500 from the sale.

I'm just rambling here. Also rounding.

Might be worth looking back and totaling up the dividends you reinvested.

 

[Bali Hai Again]

Could you have reinvested $3000 worth of dividends to bring your basis up to $8000 resulting in a capital loss of $500 if you realize $7500 from the sale.

I'm just rambling here. Also rounding.

Might be worth looking back and totaling up the dividends you reinvested.

That’s what I was thinking too. I’ll check my tax returns as the dividends are on there.

Great idea. Thanks!

 

[Bali Hai Again]

Update:

Had forgotten that I over contributed the deductible amount by approx. $1k to my IRA one year with same brokerage. So I had them remove the over contribution from IRA and put it into subject account. That plus total dividends is close to 8k.

Thanks for the help!

 

[adjusterjack]

Happy to help.

 

[LdiJ]

Update:

Had forgotten that I over contributed the deductible amount by approx. $1k to my IRA one year with same brokerage. So I had them remove the over contribution from IRA and put it into subject account. That plus total dividends is close to 8k.

Thanks for the help!

Ok then your cost basis is going to be around 8k with your sales proceeds around 7.5k for a capital loss of .5k

 

[Bali Hai Again]

Ok then your cost basis is going to be around 8k with your sales proceeds around 7.5k for a capital loss of .5k

Thank you for the reply LdiJ. I want to get this nailed down because this year I have control to manipulate my income taxes (zero) by withdrawing from IRA up to the zero tax threshold. Next year (RMD) I won’t have that capability. So IF I can reduce my income by .5k capital loss and increase the IRA withdrawal by .5k and no income tax that’s my goal. .5k isn’t much but it helps. I have found that if I add just 1k over the zero tax threshold it adds another $800 SS tax to the 1k for a whopping 18% tax on the 1k. And I want to maximize the tax deferred IRA withdrawal and pay no income taxes on it.

So, if I can’t sell this mutual fund AND reduce my income by .5k this year, I probably won’t sell it.