I have a regular brokerage account (not tax deferred). I bought a mutual fund a number of years ago, and over the years the dividends have been reinvested in the same fund. This year, I was advised to rebalance my portfolio, so I sold all of this mutual fund. Unfortunately, the last dividend reinvestments were within the last year.
So the question is, does this reinvestment cause my entire mutual fund sale to be taxed at the long-term or the short-term capital gains tax rate? Or is the recent reinvestment portion short term and everything else long term? If so, what do I use for the tax basis for all of that?
It’s not the dividends I am asking about. It is the reinvestments of them. When I sold the mutual fund, all of the fund, including the reinvestments got sold. The question is, are each of the small little reinvestments taxed separately, or in one big lump?