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Are mutual funds 'encouraged' to pay dividends & capital gains in December ?
Old 12-18-2015, 03:11 PM   #1
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Are mutual funds 'encouraged' to pay dividends & capital gains in December ?

It seems like most of the funds I've owned over the years, pay in December.

Could it be that they're influenced by the IRS ?
Why wouldn't the funds wait until January to pay, in that case, many would not have to pay taxes for about 15 months instead of 4 ?
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Old 12-18-2015, 03:25 PM   #2
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Originally Posted by ownyourfuture View Post
It seems like most of the funds I've owned over the years, pay in December.

Could it be that they're influenced by the IRS ?
Why wouldn't the funds wait until January to pay, in that case, many would not have to pay taxes for about 15 months instead of 4 ?
They have to distribute the dividends and capital gains to share holders or pay the taxes on them at their rates. Some distribute a couple times a year. But waiting for December for the bulk of it since then they have a better tally as to how much must be distributed.
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Old 12-18-2015, 03:34 PM   #3
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Yes, there are laws that "encourage" them to do so.

They cannot hold them to the next calendar year. Nor should they want to distribute say in November, because they would have to distribute again in December anyways if they received more income before the end of the year.
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Old 12-18-2015, 06:38 PM   #4
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I think most funds close their annual books on Oct 31, which gives them a couple of months to determine and pay the distributions.

It's probably tradition driving the end of year events. The IRS requirement is to do it annually.

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The fiscal year ends on Oct. 31 for most fund companies, and they typically estimate their distributions after that date for payment sometime in December.
http://money.usnews.com/money/blogs/...ns-a-bad-thing
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Old 12-18-2015, 07:44 PM   #5
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Originally Posted by audreyh1 View Post
I think most funds close their annual books on Oct 31, which gives them a couple of months to determine and pay the distributions.

It's probably tradition driving the end of year events. The IRS requirement is to do it annually.

http://money.usnews.com/money/blogs/...ns-a-bad-thing
Tradition and some legacy processing by parts of the fund industry. When the books close there's a lot of year end accounting that occurs. There's scheduling of resources that makes it convenient to have the funds process in a group. Year end processing in the industry is a royal PIA. I used to w*rk in that industry and YE sucked big time. I recall people who were good at it getting pigeon holed every year.
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Old 12-18-2015, 07:49 PM   #6
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Quote:
Originally Posted by ownyourfuture View Post
It seems like most of the funds I've owned over the years, pay in December.

Could it be that they're influenced by the IRS ?
Why wouldn't the funds wait until January to pay, in that case, many would not have to pay taxes for about 15 months instead of 4 ?
Others have answered the Dec vs Jan question. But it wouldn't delay the interval between dividends and taxes anyway if your dividends are at all significant. You have to pay estimated taxes quarterly or you'll incur a penalty. I like Dec...
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Old 12-23-2015, 05:28 PM   #7
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Thanks for the replies
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Old 12-23-2015, 05:53 PM   #8
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Yes, there are laws that "encourage" them to do so.

They cannot hold them to the next calendar year. Nor should they want to distribute say in November, because they would have to distribute again in December anyways if they received more income before the end of the year.
From the Wikipedia article on Mutual Funds:" Specifically, they must diversify their investments, limit ownership of voting securities, distribute most of their income (dividends, interest, and capital gains net of losses) to their investors annually, and earn most of the income by investing in securities and currencies.[2] There is an exception: net losses incurred by a mutual fund are not distributed or passed through to fund investors but are retained by the fund to be able to offset future gains."
https://en.wikipedia.org/wiki/Mutual_fund
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