Tax implications liquidating mutual funds Lava dating site

The IRS contends that when your fund declares a dividend or capital gain, it is your choice to reinvest this distribution or not.

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” And they say, “ Ten grand,” and the tax preparer records that they made a profit of $4,000, includes it on their Schedule D, and they end up paying taxes on that profit all over again!

This sounds preposterous, but I can assure you it is perhaps the most common tax mistake made by mutual fund investors. Most investors think the “amount invested” is the amount of money they sent to the fund.

Further say the stock pays a dividend and grows in value, and the fund manager then sells the stock.

You’ll receive a dividend distribution, which is taxable as all dividends are taxed, and you’ll also receive a capital gains distribution, taxable at capital gains rates.

You can avoid this problem simply by following these steps: keep all your mutual-fund statements, and when your tax preparer asks you a question, don’t answer.

Instead, give your tax preparer the statements you collected. Here—take my statements and figure it out yourself!

Mutual funds are not investments, but rather pools of money that buy investments.

Say you own a stock fund and the fund manager buys a stock.

Say that over a period of 10 years, you accumulate 1,000 shares of a mutual fund that are now worth per share, for a total of ,000.

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