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I'd like to move money from a mutual fund to an index fund. I'm not too excited about paying the long term capital gains taxes when I take the money out of the mutual fund - the money's been in there for about 10 years. Is there a smart way to make this change?
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ejcg: "I'd like to move money from a mutual fund to an index fund. I'm not too excited about paying the long term capital gains taxes when I take the money out of the mutual fund - the money's been in there for about 10 years. Is there a smart way to make this change?"

I hate to be the bearer of bad news, but most index funds are in fact mutual funds.

The good news (such as it is), is that your basis in your existing mutual fund has been increasing with each reinvested dividend and capital gain over the years (assuming that you have been reinvesting all distributions).

Hope this helps. Regards, JAFO

PS - I have assumed that you are discussing a taxable account because you mentioned taxes and did not reference an IRA, 401-k or other tax benefitted account.
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No theres not, but you can try to sell them in a year when you haven't had alot of income from other sources. Or if you have a year(example:say 1997 if you were out of work) you can ammend the last five years and average them together. or sell some this year and some the next.
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<< No theres not, but you can try to sell them in a year when you haven't had alot of income from other sources. Or if you have a year(example:say 1997 if you were out of work) you can ammend the last five years and average them together. or sell some this year and some the next. >>

I'm not aware of any averaging available for straight mutual fund capital gains in a taxable account, which is what the original post addressed. Also, you can't amend returns to reflect transactions that didn't take place during the period in question.

Phil Marti
Tax Preparer
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The firs poster's response was the best one --- check your facts before you fret about the capital gains tax. Your basis has been increasing year by year because of the distributions that have been credited to your account (and included in your income). You do not have as much of a tax problem as you think.
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