Expert: Gina Boykin - 2/6/2008

Question
To help pay for our wedding, my wife sold mutual funds she had received as a kid from her parents.  What are the tax liabilities for such a sale?

Answer
Any stocks/mutual funds held over 1 year are taxed at the long-term capital gains tax rate of 15%, unless you earn less than $15,000 this year - then your tax rate is only 5%.

You will have to get three sets of information from the broker:
(1)fair market value (FMV) of the funds when they were purchased
(2)FMV on the date of the gift
(3)FMV on the date the funds were sold

Gain or loss is determined as the difference between your cost basis (which could be the purchase price or price when the funds were gifted) and the sales price.  If you have a gain, this amount is multiplied by the capital gains tax rate to get your taxes due.

You may have a gain or loss depending on what happened with the fund between the time it was originally purchased and when it was sold.  To get more information on how to calculate cost basis, visit this website below:

http://invest-faq.com/articles/tax-cap-gains-basis.html