Your Money : How Mutual Fund Losses Can Spell Tax Relief : Investment: Applying lost capital against gains can mean thousands of dollars in savings. But you’d better hurry.

During the next few days, mutual fund shareholders can make several moves that will save them hundreds or even thousands of dollars in taxes.

If you own shares in one or more funds, you should move quickly to take advantage of the potential savings.

For starters, look for ways to take advantage of capital losses you may have incurred this year in one or more mutual funds. The past 12 months or so have been difficult ones for funds of all stripes, including domestic stock and bond funds as well as funds that buy overseas.

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If you have incurred losses in any of those funds, you can apply the losses against capital gains in other funds, or even against your income from work, to reduce your taxable income.

For example, say you earn $3,000 in capital gains this year. Come tax time, you will owe Uncle Sam $840 on that gain ($3,000 multiplied by the 28% capital gains tax rate).

But what if you also recorded a $3,000 loss in a long-term Treasury bond fund? In that case, you can sell the Treasury bond fund shares and realize the loss. Then you can apply the $3,000 loss against your $3,000 capital gain and cancel out the tax bill.

Congratulations: You just saved $840.

What if you have no capital gains? In that case, you can apply as much as $3,000 of losses in funds against your income. You can carry forward any leftover losses and use them in future years.

There are a couple of points to consider before you take your losses. First, you don’t need to worry about any of this if your money is invested in tax-sheltered accounts such as IRAs, Keoghs or 401(k)s. In those accounts, your gains continue to compound tax-deferred, and losses are of no use to you even for tax purposes.

Second, you can’t sell a fund just to realize the loss and then reinvest in it immediately. Instead, you have to wait at least 30 days to get back into the fund.

Sounds like trouble, doesn’t it? After all, you may want to keep your fund if it has been a long-term winner and there have been no major changes in its strategy: One bad year is no reason to dump a good fund.

But the IRS limitation is no problem in most cases. You can sell your shares and invest the proceeds in a similar fund for 31 days, then shift the money back into the original fund.

With more than 5,000 funds out there, you should be able to find a fund that will do duty as a clone for a month.

For example, say you invested $10,000 in T. Rowe Price New Asia on Jan. 1, 1994. You sold the shares on Nov. 30, realizing a $1,700 capital loss and using that money to offset a $1,700 gain in another fund. Savings: $476.

Next you reinvested the money in Scudder Pacific Opportunities for 31 days. By Jan. 2, you can reinvest the money in T. Rowe Price New Asia. Meanwhile, you haven’t missed much.

Of course, the strategy only works if you use no-load funds. Otherwise, you will need to pay a sales charge when you reinvest in the original fund.

That said, review your portfolio of funds to find those that have posted losses during 1994. Chances are you won’t have much trouble finding one or two examples. Check volatile stock funds first, but don’t forget your bond fund holdings: The average general bond fund tracked by Morningstar Mutual Funds lost 6.1% through November.

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Before you decide which funds to sell, you may want to consult with a professional tax adviser. He or she can help you take full advantage of the rules that are in your favor, while sidestepping potential problems.

But by all means, do it sooner rather than later. Cutting your tax bill won’t make up for the losses you may have suffered in mutual funds during the past year or so, but it will reduce the sting considerably.