Do Mutual Funds Distribute Losses

[Splash]

Vanguard Precious Metals and Mining Fund is significantly changing it's investment objectives and strategies as well as fund managers. We have owned this fund for several years and have a sizeable unrealized long-term capital loss. So, I'm thinking that as the fund realigns its investments to match it's new objectives the fund will realize losses. Will these losses be distributed to investors similar to how capital gains get distributed?

 

[audreyh1]

No, losses are not distributed by mutual funds. They are kept and used to offset future gains.

If you have a large loss you would like to realize, you need to sell the fund. You can buy it back after 30 days if you want to keep the investment for the long term.

 

[pb4uski]

No, think about it. When they distribute gains they give you money... in cash or more chares if the cash is reinvested. In order to "distribute" losses they would need for you to send them a check... I don't see that happening.

Your best bet is to sell, realize the loss and then use it to harvest gains on your winners tax-free or to offset ordinary income for up to $3,000 a year.

 

[MRG]

No, think about it. When they distribute gains they give you money... in cash or more chares if the cash is reinvested. In order to "distribute" losses they would for you to send they a check... I don't see that happening.

Your best bet is to sell, realize the loss and then use it to harvest gains on your winners tax-free or to offset ordinary income for up to $3,000 a year.

+1

Hehehe.

A co-w*rker fat fingered a distribution percentage on a stock distribution. The checks were mailed before anyone knew about the error. Sweet lady but she goofed, big time. Megacorp was on the hook for her loss.

Her punishment was to hand write letters to each shareholder explaining what she did and asked them to please send XYZ dollars to repay. Yeah it's hard to get money back.

 

[Splash]

Thanks everybody. That makes a lot of sense.

 

[Souschef]

+1

. Yeah it's hard to get money back.

Very true. I took a distribution from my 401K, and they told me I took too much, please send a check. My answer- "NO".

 

[Siestatime]

Your best bet is to sell, realize the loss and then use it to harvest gains on your winners tax-free or to offset ordinary income for up to $3,000 a year.

I’m in the same boat as OP with this fund. Just to be clear, I can offset up to $3,000/yr against all income (stock gains AND ordinary income) or offset complete loss against winners and up to $3,000/yr for ordinary income.

If it’s the former, I’ll be writing off $3,000/yr for the rest of my long life [emoji20]

 

[SecondCor521]

I’m in the same boat as OP with this fund. Just to be clear, I can offset up to $3,000/yr against all income (stock gains AND ordinary income) or offset complete loss against winners and up to $3,000/yr for ordinary income.

If it’s the former, I’ll be writing off $3,000/yr for the rest of my long life [emoji20]

Sort of.

First you net your STCL and STCG against each other and your LTCL and LTCG against each other. Then, you net your ST against your LT. Third, if there is still a loss at this point, you can offset up to $3K against OI. Fourth, if there is still a loss at that point, you can carry it forward until you die; then the remaining loss is extinguished.

 

[Texas Proud]

+1

Hehehe.

A co-w*rker fat fingered a distribution percentage on a stock distribution. The checks were mailed before anyone knew about the error. Sweet lady but she goofed, big time. Megacorp was on the hook for her loss.

Her punishment was to hand write letters to each shareholder explaining what she did and asked them to please send XYZ dollars to repay. Yeah it's hard to get money back.

If they have regular distributions it is not as hard as you might think.... when I was trustee for a bond that had overpaid (not my fault, I found the error) we just went to DTC and said give us back the money... they took it from the brokers and sent a check.... now, the people who owned their own bonds outright we did send a letter asking for that money back and as you can expect got no responses... BUT, they did not get another check until we had collected the full amount that was overpaid... took 18 months IIRC... anybody who bought the shares bought it with that liability...

 

[audreyh1]

I’m in the same boat as OP with this fund. Just to be clear, I can offset up to $3,000/yr against all income (stock gains AND ordinary income) or offset complete loss against winners and up to $3,000/yr for ordinary income.

If it’s the former, I’ll be writing off $3,000/yr for the rest of my long life [emoji20]

Essentially- yes, any capital losses can be offset gains any capital gains. The $3K per year limit applies to ordinary income only.

 

[Siestatime]

Sort of.



First you net your STCL and STCG against each other and your LTCL and LTCG against each other. Then, you net your ST against your LT. Third, if there is still a loss at this point, you can offset up to $3K against OI. Fourth, if there is still a loss at that point, you can carry it forward until you die; then the remaining loss is extinguished.

Thank you, SecondCor.

 

[Siestatime]

Essentially- yes, any capital losses can be offset gains any capital gains. The $3K per year limit applies to ordinary income only.

Thank you, Audreyh