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Subject:  Mutual Funds, Capital Gains - I'm lost Date:  7/18/1999  10:18 PM
Author:  ChrisPRocks Number:  17448 of 127753

I think I'm beginning to understand
what I need to do in order to determine
the taxes I would owe if I sold my funds.

I do have another related question, the answer
to which will probably help me to understand this
whole subject a little better:

Hypothetical: I own a fund for 10 years.
The only additional shares purchased are
through capital gains and dividend reinvestment.
Obviously, taxes are paid yearly. As of
12/31/1998 the fund is valued at $10,000.
I sell a full position in a mutual fund (no
previous shares had been sold) on 06/01/1999.
The value of the fund at that time is now $12,000.
Why can't $10,000 be the cost basis, $2,000
be the capital gains, and $400 be the
capital gains tax owed (based on 20%).
(Also assuming that there is no reinvestment
between 01/01/1999 - 06/01/1999)

I understand that this is not right but I hope
the answer to why it is wrong will help me
to finally understand this wonderful world
of taxes.

Thanks to all-
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