Borrowing Shakespeare’s comment about a rose, the sale of a mutual fund with any name is still taxable. When the term “tax-exempt” is applied to a bond fund, it refers only to the income received as dividends. Selling results in a capital gain or loss, which is reported on Form 8949 and Schedule D of your tax return just like sales of other securities. The gain or loss is the difference between sales proceeds and basis. Basis is typically the cost you paid for the bond fund shares.
Indicate whether you held the bond fund for one year or less by using Part I of Form 8949 or for more than one year by using Part II.
Check Box A if the Form 1099-B you received reporting the bond fund sale also shows your basis or Box B if your 1099-B does not show basis. Check Box C if you did not receive a 1099-B but know the amount received from selling the fund and your basis.
Describe the bond fund in Column (a).
Enter the purchase date of the fund shares in Column (c).
Record the sale date of the fund shares in Column (d).
Place the amount you received from selling the fund shares in Column (e).
State your original cost for the fund shares you sold in Column (f) labeled as “Cost or other basis.”
Total the amounts in Part I on Line 2 and the amounts from Part II on Line 4.
Enter the totals from Line 2 of Form 8949 on Part I of Schedule D.
Record the totals from Line 4 of Form 8949 on Part II of Schedule D.
Place any other amounts on Schedule D that are applicable from completing other forms in your tax return.
Complete Part III of Schedule D by combining the lines from Part I and Part II, as instructed.
Items you will need
- Internal Revenue Service Form 8949
- Description of the bond fund
- Date of original purchase of the bond fund
- Date of selling the bond fund
- Net proceeds from selling the bond fund
- Original cost of the bond fund shares
- Internal Revenue Service Schedule D
- Use a single Form 8949 to report only sold securities for which Box A is checked and additional Forms 8949 for Box B and Box C.
- You might have adjustments on Form 8949 to your gain or loss, but these are rarely encountered. An example is wash sales, in which you repurchase a security within 30 days after selling it. Other adjustments do not apply to tax-exempt bond funds.
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