An exchange between different funds in a nonretirement account is a taxable event that will generate a 1099-B, provided that the from fund has a fluctuating value (i.e., not a money market) and the to fund is different from the from fund.

Do I have to pay taxes if I exchange mutual funds?

Generally, yes, taxes must be paid on mutual fund earnings, also referred to as gains. Whenever you profit from the sale or exchange of mutual fund shares in a taxable investment account, you may be subject to capital gains tax on the transaction. You also may owe taxes if your mutual fund pays dividends.

What does it mean to exchange a mutual fund?

When exchanging funds, an investor can move from one share class within the fund to another share class within the same fund. They may also exchange from one fund into any other fund in the fund family. In doing so they exchange their total shares for the same number of shares in another fund.