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<< I've just sold about $50,000 in mutual funds which were doing poorly so I could invest in stocks.

Will I be taxed on the entire increase in the funds from their price when I bought them to the date I sold? For several years I added a fixed amount per month to the funds. How do I calculate the total increase for each year? I've been paying capital gains taxes every year. Is this added to the original cost for each year? >>

If you sold your entire stake in the fund it will be easier than you think. You just add up everything you invested, including the reinvested distributions, separated into shares you held more than 1 year before selling and those you didn't. The difference between your sale price and your cost (a/k/a "basis") is your capital gain, which will be taxable income to you in 2000.

<< The funds did poorly last year (but were still considerably higher than my initial purchase). Can I claim a loss in 1999? >>

No. Capital gains/losses are realized only when you sell.

<< I'm retiring this week at age 68 and am concerned I'll have to pay a large tax in 2001 because the trade will show I've made money on paper although I've never seen it or used it. >>

That's not true. You've used it to buy stock. Just because you didn't take it in cash doesn't mean you didn't have it.

<< This is my first message on the internet. If you can shed any light on this situation, I'll appreciate it very much. >>

In this same folder there's a message board on Tax Strategies. In that board there's an FAQ which has several articles about capital gains. There's also an article on Estimated Taxes that you should read. If you have followup questions, that's probably a better board to ask them on, since that's the one most tax pros frequent.

Phil Marti
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