Mutual Funds, Capital Gains, and Wash Sales - I'm confused?

When you sold the Index fund, it is just that a sale. You will owe income tax this year on the capital gain from the sale. Be sure to look at your cost basis of the index fund. If you have reinvested all of your dividends and and capital gains in past years, then these amounts will be added to you original purchase of the index fund. To have a wash sale you would have to have purchased the same index fund within 30 days of the sale. You may find this in IRS publication 17.