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The tax man cometh - Mutual Fund Cap Gain Distributions
Old 11-06-2008, 08:39 AM   #1
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The tax man cometh - Mutual Fund Cap Gain Distributions

According to this article it appears many of us will get some salt in our wounds come Jan 1.

5 Ways to Beat the Tax Bite of Mutual Funds: Financial News - Yahoo! Finance
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Old 11-06-2008, 09:09 AM   #2
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Perhaps someone can enlighten me here.

But aren't the bulk of the capital gains due to redemptions then distributed back to those doing the redemption ? For a buy and holder the capital gains hit (if any) should be modest.

please enlighten me as to how this works.
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Old 11-06-2008, 11:46 AM   #3
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Pretty good article on the subject:

The trouble with mutual funds - Nov. 6, 2008
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Old 11-06-2008, 11:47 AM   #4
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Originally Posted by MasterBlaster View Post
Perhaps someone can enlighten me here.

But aren't the bulk of the capital gains due to redemptions then distributed back to those doing the redemption ? For a buy and holder the capital gains hit (if any) should be modest.

please enlighten me as to how this works.

Don't know for sure but I would guess that the gains are distributed equally to all the shares on the record date. If true, that means that the buy and holders also get hit. I know my largest distributions were in 2000 which was the start of the down market.
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Old 11-06-2008, 01:44 PM   #5
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Originally Posted by OAG View Post
Pretty good article on the subject:

The trouble with mutual funds - Nov. 6, 2008
As pointed out in this article, now is a great time to do tax lost harvesting. Sell your depreciated mutual funds and buy back similar holdings. You get a paper loss to offset capital gains and you hold your position for long term gain.
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Old 11-06-2008, 05:06 PM   #6
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there is an advantage to paying cap gains taxes early, if rates increase.
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Old 11-06-2008, 05:55 PM   #7
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Originally Posted by MasterBlaster View Post
Perhaps someone can enlighten me here.

But aren't the bulk of the capital gains due to redemptions then distributed back to those doing the redemption ? For a buy and holder the capital gains hit (if any) should be modest.

please enlighten me as to how this works.
The net realized capital gains, whether caused by changes in portfolio or redemptions, have to be distributed to the fund share-holders. The distribution is split across all the current share-holders.
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