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You only need to pay tax on the gain in the mutual fund.

If you bought the shares for $10,000 and held them and sold them for $20,000, and your cost basis, if you re-invested dividends, was now $13,000.......you'd owe tax on the $7000 gain.

Your mutual fund company should have listed what the 'basis' for the shares sold was....so you can figure it out.

If it was inside an IRA/401K , there are no taxes due till you take the money out of the IRA in a 'distribution'.

Otherwise, you need to go back to your original purchase of the fund - and the price including commissions paid.....then go back to each year to determine what the dividends re-invested were - thus increasing your 'basis' as the money you got you re-invested and likely also paid income tax on since they sent you annual forms for tax purposes telling you what your 'income' was.


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