Now that tax time is approaching, here are answers to a few questions If I sell shares in a fund or exchange them from one mutual fund to another, do I need to report my gain or loss on my income taxes?
Yes, unless the transactions occurred in a tax-sheltered retirement plan or a variable annuity. An exchange of assets from one fund to another is the same as a sale and purchase for tax purposes.
Will my fund sponsor provide information about my own gains and losses?
Maybe. Although shareholders are ultimately responsible for calculations of their own fund transactions, a growing number of mutual-fund families do report on cost basis (including reinvestment) on funds, whether you've sold them or not.
Do I have to pay taxes on mutual-fund distributions each year if I reinvest them automatically in my account?
Yes, it doesn't matter to the Internal Revenue Service whether you take distributions in cash or reinvest them. Keep in mind that reinvested dividends and capital gain distributions should be added to your original cost basis to avoid double taxation.
Pub Date: 3/17/96