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Old 02-24-2008, 02:06 PM
TaxGuru TaxGuru is offline
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Join Date: Jan 2007
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Cost basis of Mutual Funds sold where dividends and capital gains are reinvested!

Since you "did reinvest all cap gains and dividend" as you mention, then your basis is the aggregate of Capital Gains and Dividends received over the years plus the original purchase price!

Hence, your gain or loss would be calculated as follows:
Sale Price - Cost Basis = Gain or Loss

Cost Basis is calculated as follows:
Cost Basis = {Original Cost Purchase +(Sum of all Cap Gains + Dividends)}

Effectively, the reinvestment of dividends and capital gains have increased your cost basis, and thus reduced your potential profit by $2,019, the amount of cpaital gains and dividends that were reinvested. The Tax Code require you to increase your cost basis by that amount!
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