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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Re: Loss on Transfer of Mutual Funds Date: 11/17/1999 3:58 PM
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During 1999, I transferred a mutual fund account from one fund to a different fund in the same family of funds. I kept a record of the cost basis of this fund and when I transferred it, the cost basis exceeded the market cost thus resulting in a loss. Does the cost basis of the previous fund carry over to the new fund or do I need to recognize the loss on this transfer and start the cost basis of the new fund at the market price?

Your cost basis does not carry over. As you noted, you will recognize the loss on the sale of the first fund shares and have a new basis for the new fund.

If the latter, do I need to offset the loss with a gain in the current year or can I carry it over to future years? If so, how many years? If not, can the gain be from any sale (e.g., stocks, mutual funds, etc.)?

You can use up to $3,000 of net capital losses against other types of income. If your net losses are larger than that, the balance carries over to the next year where it is netted with capital transactions for that year. All of your capital gains and losses are put together, so gains and losses from the items you mentioned can offset each other.

I'd also suggest you take a look at the investing section of the FAQ's. The link is at the top of this page. Roy, aka TMFTaxes, covers the most common (and some pretty uncommon!) questions you might have. Besides, he get a warm, fuzzy feeling every time someone clicks on it. ;-)


--ptheland
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