Capital gains or losses occur when you sell or exchange shares. The gain or loss shown on your Form 1099-B is the difference between the cost basis of your shares and the amount at which they were sold. The gain/loss information which is not reported to the IRS is an estimate. It is your responsibility to accurately report information on your tax return.
Example: Mary Smith invests $1000 into her mutual fund account and later receives a $100 dividend, which is reinvested. Her cost basis is $1100 She then sells all her shares and receives a check for $1300 Mary has realized a capital gain of $200, which must be reported on her tax return.
