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I cashed out a taxable mutual fund in January. It is a long held fund. I got an activity history of all the transactions so that I can figure out an estimated tax to send in to the IRS as currently, I'm pretty close to paying what I owe via work withholding. So, I'm definitely going to owe. So, I've added up all the amounts of my purchases, all the reinvested capital gains, all the reinvested dividends as in my mind those are all purchases. That comes to about 8,000 less then what I received from the mutual fund company. So for the sake of example:

My purchases are 22,000 and I received 30,000 from my sale. So would my capital gain be 8,000 and my tax owed be 8,000 x .15 = 1,200? Or am I totally figuring this wrong? Most examples I find aren't for cashing out the whole fund just a portion of shares, so I'm a bit confused. Thanks in advance for your help.

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  • when did you make the first purchase? They may have to report the cost basis. – mhoran_psprep Mar 30 at 16:35
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    Note that most brokers offer you that complete calculation on their website - check for ‚realized gains‘. – Aganju Mar 30 at 19:41
  • 2001 was first purchase. I haven't purchased anything since 2012, it's just sat. I couldn't find anything on the website for realized capital gains. – MinnieB Mar 30 at 21:11
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Your analysis sounds good to me.

Here's a tool from the IRS to see if you need to pay estimated taxes: https://www.irs.gov/help/ita/am-i-required-to-make-estimated-tax-payments

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  • Thank you, I'll take a look at that. – MinnieB Mar 30 at 21:17
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That should be more or less correct. Each share will have some amount of capital gain or loss associated with it. Your method of comparing the total of the purchase prices to the total sale price should be equivalent to calculating each share's gain/loss and adding them up.

However, you mention re-invested dividends and capital gains. You are correct that you should treat these as purchases, but you need to look at the timing. If any of these purchases were less than one year prior to your sale, those shares would count as short-term capital gains (or losses), rather than long-term, and be taxed as ordinary income rather than the more favorable capital gains rate.

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  • The part that would count as a short term capital gain only comes to about $350. Not too worried about that. Thanks for the response. I appreciate the advice. – MinnieB Mar 30 at 21:17

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