How to Sell a Mutual Fund for Capital Losses
- 1). Determine your gain or loss. Before you sell a fund for a loss, make sure you have the correct purchase information, including date and total cost, and compare it with the current value of the fund. If you have reinvested dividends in the fund, your cost basis for tax purposes may have actually risen, so make sure you have accurate records of reinvestment purchases. If you are unable to compute your cost basis, contact your financial representative. Generally, firms will keep track of your adjusted cost basis for you, although you may have to pay extra for this service.
- 2). Sell your fund, and keep your tax records. When you sell an investment such as a mutual fund, you will receive a 1099-B at year-end from your financial services company. While the 1099 will not compute your gain or loss for you, it will show you the total proceeds from your sale, and this amount will be reported to the IRS.
- 3). Consult Schedule D of Form 1040. Follow the instructions on Schedule D to help you compute the correct amount of your capital loss. Match the sales proceeds listed on your 1099-B with your original cost data. Make sure to divide your transactions into short-term (those held for one year or shorter) and long-term (those held longer than one year). Enter the dates of purchase and the cost information as instructed. For mutual funds with multiple reinvested dividend purchases, you can enter "various" for the purchase dates and enter a single cumulative purchase price.
- 4). File your taxes. Transfer the total capital gain or loss you compute from Schedule D to line 13 of your Form 1040. Attach your completed Schedule D when you submit your tax return.