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Please clarify your situation here.
Are you saying that you sold some mutual funds which were part of your traditional IRA account and then withdrew some money from your IRA?
What age were you when the withdrawal occured?
Hello again Phil,
Thank you for the clarification.
If these mutual funds were part of your IRA account, then the sale of those funds are not treated as capital gains. Therefore there is no need for you to calculate any cost basis on the shares that you sold.
All of the money that is in your IRA account is tax deferred money, meaning no taxes have every been paid. When you contribute money to an IRA account, you deduct those contributins from your taxable income. You are then allowed to invest the money in that IRA account in mutual funds or stocks or any investment that you wish, and any gains are earnings you have are not subject to tax until such time as you withdraw the funds.
But when you withdraw the funds, the entire withdrawl is taxed as ordinary income and not as a capital gain. You have no basis in the shares that were sold because it was all tax deferred money.
You will receive a 1099-R form from the investment firm sometime this month which will report the total amount of the IRA withdrawal you made. That amount is simply taxed as ordinary income to you and taxed at ordinary income tax rates. In addition, if you were under the age of 59-1/2 at the time the withdrawal was made, the amount withdrawn is subject to an additional 10% penalty.
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Thank you Phil