Question on Mutual Fund Tax

This may not be the newsgroup for this but I want to ask anyway because I am
sure people here will know the answer...

Lets say I purchase a mutual fund in January of 2005 with an initial $10,000
and then sell that fund at the end of the year for $11,000. Do I end up
having to pay tax on the entire $11,000 or do I pay the tax only on the gain
of $1000?

The reason I ask is that I am new to brokerage accounts and just received my
tax statement from the brokerage house. There is a section which lists the
proceeds and at the top of this list, it says that this info is being
reported to the IRS. However at the gains/loss section it says that this
part is NOT being reported to the IRS.

I was always under the impression that it is the gain that is taxable. If
so, why would the IRS want the proceeds information and not the gain
information from the brokerage house?

Re: Question on Mutual Fund Tax

You would have a taxable gain of $1,000.00


"Jay A" <> wrote

> This may not be the newsgroup for this but I want to ask anyway because I
> am sure people here will know the answer...
>
> Lets say I purchase a mutual fund in January of 2005 with an initial
> $10,000 and then sell that fund at the end of the year for $11,000. Do I
> end up having to pay tax on the entire $11,000 or do I pay the tax only on
> the gain of $1000?
>
> The reason I ask is that I am new to brokerage accounts and just received
> my tax statement from the brokerage house. There is a section which lists
> the proceeds and at the top of this list, it says that this info is being
> reported to the IRS. However at the gains/loss section it says that this
> part is NOT being reported to the IRS.
>
> I was always under the impression that it is the gain that is taxable. If
> so, why would the IRS want the proceeds information and not the gain
> information from the brokerage house?
>

Re: Question on Mutual Fund Tax

Jay A wrote:
> This may not be the newsgroup for this but I want to ask anyway because I am
> sure people here will know the answer...
>
> Lets say I purchase a mutual fund in January of 2005 with an initial $10,000
> and then sell that fund at the end of the year for $11,000. Do I end up
> having to pay tax on the entire $11,000 or do I pay the tax only on the gain
> of $1000?

Just the gain, assuming it's a taxable account.

>
> The reason I ask is that I am new to brokerage accounts and just received my
> tax statement from the brokerage house. There is a section which lists the
> proceeds and at the top of this list, it says that this info is being
> reported to the IRS. However at the gains/loss section it says that this
> part is NOT being reported to the IRS.
>
> I was always under the impression that it is the gain that is taxable. If
> so, why would the IRS want the proceeds information and not the gain
> information from the brokerage house?

Because you are suppose to report the gain to the IRS. For several
reasons the brokerage may not know the actual cost basis of your funds.

Re: Question on Mutual Fund Tax

If you had waited a few days your short term gain would be a long term
capital gain and taxed at a lower tax rate. Also brokerage firms report
both the gain and the total of gross sales. The IRS is looking for folks
hiding gains. If the IRS is flagged that you have sold $100,000 in stock &
mutual fund sales, you bet they will be looking forward to your tax return.


PeterL <> wrote in message
news:
>