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$20,000,000,000 in Taxes.
Old 10-30-2006, 10:46 AM   #1
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$20,000,000,000 in Taxes.

http://www.investmentnews.com/articl...rticleId=56167

Wow, someone must be paying my part of this tax bill because of my tax-management strategy.

For those of you that will be paying my uncle his due, thank you.

U.S. mutual fund investors could pay about $20 billion in taxes for this year, in part because capital gains distributions by funds in 2006 are expected to be the third-largest on record, experts say.

Unlike most corporations, a mutual fund typically distributes all its earnings - capital gains and ordinary dividends - to shareholders each year, according to the Investment Company Institute. That means that fund investors are responsible for paying tax on a fund's earnings whether they take distributions in cash or reinvest them in the fund.
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Re: $20,000,000,000 in Taxes.
Old 10-30-2006, 11:36 AM   #2
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Re: $20,000,000,000 in Taxes.

One of the best ways to hurt your overall return in your portfolio is to be too concerned about taxes. Some of the real stinker investments are those entitled "tax managed or tax strategy.... whatever"

If you invest in common stocks, you have a risk we mutual fund folks dont worry about; its called "company risk". Google "Enron" to get a feel for that kind of risk.
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Re: $20,000,000,000 in Taxes.
Old 10-30-2006, 12:00 PM   #3
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Re: $20,000,000,000 in Taxes.

Quote:
Originally Posted by mickeyd
U.S. mutual fund investors could pay about $20 billion in taxes for this year, in part because capital gains distributions by funds in 2006 are expected to be the third-largest on record, experts say.
Looks like the industry has finally absorbed all those cap-loss carryforwards from the 2000-2003 meltdown...
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Re: $20,000,000,000 in Taxes.
Old 10-30-2006, 01:56 PM   #4
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Re: $20,000,000,000 in Taxes.

So I guess a cut in tax rates does create more revenue to the government afterall.
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Re: $20,000,000,000 in Taxes.
Old 10-30-2006, 02:47 PM   #5
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Re: $20,000,000,000 in Taxes.

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Originally Posted by Nords
Looks like the industry has finally absorbed all those cap-loss carryforwards from the 2000-2003 meltdown...
I'm still carrying over like 7K from that.
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Re: $20,000,000,000 in Taxes.
Old 10-30-2006, 06:20 PM   #6
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Re: $20,000,000,000 in Taxes.

Yet another reason to love index funds. The lower the portfolio churn, the lower the realized gain distributions, the higher the after tax returns. Let those gains compound baby . . . Wah-hoo!
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Re: $20,000,000,000 in Taxes.
Old 10-30-2006, 07:04 PM   #7
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Re: $20,000,000,000 in Taxes.

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For those of you that will be paying ...
there is, of course, the consolation that they will be paying at the current cap gains tax rate ...
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Re: $20,000,000,000 in Taxes.
Old 10-31-2006, 10:43 AM   #8
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Re: $20,000,000,000 in Taxes.

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One of the best ways to hurt your overall return in your portfolio is to be too concerned about taxes.
Could you expand your thinking about this? It is my thinking that if one does not take advantage of the tax deferral or tax avoidance schemes that are available to us as taxpayers, we are missing the boat that many folks are already riding on.
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Re: $20,000,000,000 in Taxes.
Old 10-31-2006, 02:19 PM   #9
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Re: $20,000,000,000 in Taxes.

I just went to the websites of the two mutual fund companies I'm with, American Century and Janus, and they have the estimated dividends/capital gains published. Looks like I'm going to get hit with about $2800 worth this year.
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Re: $20,000,000,000 in Taxes.
Old 10-31-2006, 08:16 PM   #10
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Re: $20,000,000,000 in Taxes.

Well, theoretically, with the $$ invested in stock markets these days you'd tend to expect the capital gains distributions to be higher and higher year after year (on average). The fact that this is only the third-largest doesn't sound that bad.

I remember HUGE capital gains in 2000. It hit many folks with a shock as most funds ALSO lost money that year. That year was the biggest tax hit for my portfolio percentage-wise, BY FAR. Then, as someone pointed out, we had some serious losses for the subsequent years, and these would have offset gains from later years. 2005 was the next biggest percentage tax hit - but it was still way less than half of what I saw in 2000.

If 2006 distributions in absolute terms are less than 2005, I will be quite pleased.

But IN GENERAL, you would expect capital gains distributions to increase year after year.

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Re: $20,000,000,000 in Taxes.
Old 11-01-2006, 02:53 PM   #11
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Re: $20,000,000,000 in Taxes.

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But IN GENERAL, you would expect capital gains distributions to increase year after year
.

It depends on the fund Audrey. For example, last year the Vangaurd Total Stock Market had zero capital gains and that number should prevail in 2006 also.
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Re: $20,000,000,000 in Taxes.
Old 11-01-2006, 05:36 PM   #12
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Re: $20,000,000,000 in Taxes.

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Originally Posted by mickeyd
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It depends on the fund Audrey. For example, last year the Vangaurd Total Stock Market had zero capital gains and that number should prevail in 2006 also.
Well of course that's true. Index funds are very, very tax efficient - super low turnover means low distributions.

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Re: $20,000,000,000 in Taxes.
Old 11-01-2006, 05:49 PM   #13
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Re: $20,000,000,000 in Taxes.

I had SPY stock for 8 since 1998 and we haven't had a distribution yet. Here's where it pays to be in an index fund.
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