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Do I pay taxes on just capital gains or the whole amount withdrawn from a mutual fund?

Asked by: samserio 1061 views YA Discussion

I recently received a trust. Before my mothers death the entire trust was cash and property. While in the trust the money was put into mutual funds. I now have the mutual funds in a individual account and would like to sale some and receive cash. My account has capital gains. If I withdrawal money do I pay taxes on the entire amount withdrawn or just the capital gain amount for the portion withdrawn?
The trust paid taxes on the accounts while it was there. We simply transferred the accounts to an individual account(with the same investment firm) when I became of age to access it.
My mom died in 2007. The money was in a living trust when she died. The person handling the trust until my brother and i were of age placed most of the money into mutual fund accounts AFTER her death. The trust has been paying taxes on the account each year.

5 Answers

  1. Kerry on Jun 21, 2012 Reply

    you will pay on the gains of the account…problem is when you inheirited the money

    if I’m not mistaken, that will establish the new tax basis of the account…..example

    if mom put 100. in it and it grew over time to 150, tax basis should be on the gain or 50….

    but with your now getting the proceeds of the account your tax basis becomes the 150.

    forward…so you need to know the value of each or it when you took it over so the tax man

    can figure what is owed. have that?

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  2. snicky wicket on Jun 21, 2012 Reply

    The answer depends on the Trust. If the trust is tax deferred such as an inherited/Beneficial IRA all of the withdrawal is taxed. If it was a taxable trust, the trust may have paid taxes on undistributed earnings and only untaxed portion of gains would be taxable to you. If it is a Grantor trust or a trust that does not file a Trust return, then you pay taxes on the income annually and the capital gains when redeemed.

    If you have the money in a brokerage firm, they will send you a unified 1099 for Dividends, Interest and sale of brokerage securities.

    From your phrasing I will assume the trust distributed the proceeds to you and you put it into a mutual fund. The mutual fund was started with cash( either in the trust or outside of it) but after the passing of your mother, Your taxes will be due on the capital gain only/

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  3. Quick Answers on Jun 21, 2012 Reply

    How long ago did mom die?

    The initial cost basis is the valuation on the day she died (unless she died in 2010 and had a HUGE estate) PLUS any reinvested dividends.

    You have to know the cost basis to do your tax return whenever you cash any if of it out (including selling and buying into other mutual funds).

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  4. Lynne on Jun 21, 2012 Reply

    It sounds like you will be paying only on the capital gain. However, I would speak with a tax advisor before you withdraw any money. There may be different ways to withdraw the money that will result in higher or lower taxes.

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  5. tro on Jun 21, 2012 Reply

    if you have now inherited the mutual funds they are your own, while in the trust the trust paid any taxes that were due
    if you have dividends they will be reported to you which you will claim on your tax return
    if you sell any you will be notified of the basis of what you sell and the price you sold them for, if there is a profit you will report on Sch D and new form 8949

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