Your gain or loss on the sale of your mutual fund shares is short-term or long-term depending on the length of your holding period. Shares owned one year or less produce short-term gains or losses, those held more than one-year produce long-term gains or losses.
Determine the holding period for your mutual fund shares by using the trade dates, not the settlement dates. The trade date is the date on which you contract to buy or sell the mutual fund shares.
Start counting the holding period on the day following the day you bought the shares. Then, treat the same date in each succeeding month as the start of a new month (regardless of the number of days in the month before). Count the day you dispose of the shares as part of your holding period.
Special rules apply if you received your shares as a gift or through inheritance. When gifts are involved, your holding period generally begins at the time the donor acquired the property; inherited assets always produce long-term gain, regardless of how long you own them before selling.