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You didn't say whether you were selling all or part of your shares. I don't know whether you have sold any shares of this fund previously.

When I sell mutual fund shares, I always sell the shares which have cost the most. That causes the least capital gain taxes.

But Uncle Sammy demands consistency. If one has sold any shares on an "average cost basis", that person must continue to use the "average cost basis" for all future redemptions of shares.

I have a mutual fund in a personal (taxable) account which consistently churns its stock holdings & consistently sends me huge taxable capital gains. These are reinvested, but I redeem them the following year before those shares also generate additional taxable capital gains.

(I'd like to convert this mutual fund to an index fund, but the tax issue prevents me from doing so.)


I read in Kiplinger's "Cut your Taxes" that to "keep track of reinvested dividends; it's critical to holding down the tax when you sell your shares." However, the text didn't say why. My mutual fund, Vanguard International Growth, does the math for me. The company uses the average basis of funds redeemed. Like all taxes payers, I'm trying to reduce my tax bill. Does Kiplinger statement apply to my situation, since I use the average basis method?

thanks for your time
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