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Sale and repurchase of mutual funds

Forum|Forum|6 years ago
March 5, 2020
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I've been retired for about 10 years and have my savings in an IRA. Recently I sold two mutual funds that I have held for several years. A week later, after the market dropped, I re-purchased one of these funds along with two new ones. How will withdrawals from the funds be treated from a tax perspective, as long-term capital gains or as ordinary income? What IRS form/booklet can I read to explain this?

TurboTax Home & Biz Windows

Best answer by dmertz

If all of these transactions took place within your IRA(s), there is nothing to report. You would not have received any Forms 1099-R for transactions that took place entirely within your IRA(s). With no transaction transferring funds in or out of an IRA, there is really nothing to be explained.

If funds were transferred out of your IRA(s), that would be a distribution reportable on Form 1099-R. IRS Pub 590-B discusses IRA distributions: https://www.irs.gov/pub/irs-pdf/p590b.pdf

D

dmertzAnswer

Employee

If all of these transactions took place within your IRA(s), there is nothing to report. You would not have received any Forms 1099-R for transactions that took place entirely within your IRA(s). With no transaction transferring funds in or out of an IRA, there is really nothing to be explained.

If funds were transferred out of your IRA(s), that would be a distribution reportable on Form 1099-R. IRS Pub 590-B discusses IRA distributions: https://www.irs.gov/pub/irs-pdf/p590b.pdf

DaveF1006

Here are a couple of IRS links you can look at that gives a wealth of information on mutual funds distributions. This first link, summarizes the different types of distributions you may receive and the tax treatment of these different distributions. For an example, if you receive any dividend from the mutual fund, then it is ordinary dividend. if you sell or dispose of it, than it is treated as a capital gain or capital loss.

This IRS link gives a more in depth look on mutual funds. Between these two links, you should have the information you need regarding the tax treatment of mutual fund distributions.

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