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Old 12-28-2012, 10:28 AM   #21
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In addition to my OP, I just received a sizeable CG distribution from a tax-free (muni bond) fund, which I was not expecting at all because I just bought the fund in Aug., and rates haven't dipped all that much since then. We tried to plan our taxes pretty close this year, but with these unexpected distributions, we may get kicked into a higher bracket.

My question now is, are these CG tax-free as well, or is it just the dividends?

Tyro
Just the dividends are tax-free from muni bond funds, not the capital gains. I also received capital gains distributions from my bond funds (including muni bonds). Bond funds do tend to pay out some capital gains when they have a year of strong appreciation as they did this year. Muni bonds did as well.

Distributions are almost impossible to predict/anticipate from year to year. Capital gains distributions from bond funds tend to be rare. The only thing I feel I can predict is that next year's distributions might be slightly smaller than this years, especially if stocks don't do well in 2013.
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Old 12-28-2012, 12:07 PM   #22
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Most of my bond funds paid out cap gains distributions this year, including one which had not paid out any since 2006 (and the time before that in 1999). How much they paid out often depended on the length of the bond (i.e. short, intermediate, long), with the long-term bond funds more likely to pay them out and pay out larger ones.

You also have to be aware of the split between long-term cap gains distributions and short-term cap gains distributions, the latter of which is reported as ordinary dividend income, not on Federal Schedule D (if applicable). Back in 2010 I had a bond fund pay out a short-term cap gains distribution which was 3% of the NAV, a huge percentage, and it was fully taxable as ordinary income.
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Old 12-28-2012, 02:31 PM   #23
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You also have to be aware of the split between long-term cap gains distributions and short-term cap gains distributions, the latter of which is reported as ordinary dividend income, not on Federal Schedule D (if applicable).
Yes, that's differentiated on the statement, and again in the year-end forms, as it always has been with equity funds.
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Old 12-28-2012, 02:59 PM   #24
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In addition to my OP, I just received a sizeable CG distribution from a tax-free (muni bond) fund, which I was not expecting at all because I just bought the fund in Aug., and rates haven't dipped all that much since then. We tried to plan our taxes pretty close this year, but with these unexpected distributions, we may get kicked into a higher bracket.

My question now is, are these CG tax-free as well, or is it just the dividends?

Tyro
The funds CG distributions are usually made annually, so it doesn't matter when you buy it even up to the X-dividend date. Some wait buying funds late in the year to avoid unwanted distributions.

Just the dividends are TF, CG are taxable
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