[Search for users] [Overall Top Noters] [List of all Conferences] [Download this site]

Conference nyoss1::market_investing

Title:Market Investing
Moderator:2155::michaud
Created:Thu Jan 23 1992
Last Modified:Thu Jun 05 1997
Last Successful Update:Fri Jun 06 1997
Number of topics:1060
Total number of notes:10477

692.0. "Short-term Gains: Individual vs. Mutual Fund" by I18N::GLANTZ () Mon Feb 28 1994 23:57

As best I can understand, short-term capital gains are taxed differently if 
incurred as a stock trader vs. as a mutual fund holder.

For example, if I buy XYZ for $5 and sell it for $10 less than a year later,
I have a $5 short-term capital gain for tax purposes.

If I hold shares of a mutual fund which buys XYZ for $5 and sells it for $10 
less than a year later, that is considered a dividend for tax purposes.

Although the tax rate is identical, the difference is that I can offset my 
capital gain by selling a stock in which I have a loss (oh, say, DEC), thereby 
reducing or nullifying my tax burden.

Anyone think otherwise?
T.RTitleUserPersonal
Name
DateLines
692.1TLE::FELDMANOpportunities are our FutureTue Mar 01 1994 12:2019
re: .0

>If I hold shares of a mutual fund which buys XYZ for $5 and sells it for $10 
>less than a year later, that is considered a dividend for tax purposes.

No.  Although it is still reported on a 1099-DIV form, it is considered a
capital gain.  My vague recollection is that it is always considered a long-term
capital gain, regardless of how long the mutual fund held the underlying
stock.  There's a line on Sch B where capital gains distributions are
subtracted out, and a separate line on the 1040 where they are put back in 
(essentially moving them from the dividend category to the capital gain
category).  If you file Sch D for other reasons, or if you could benefit from 
the tax rate cap on capital gains, then there's a separate line on Sch D
for them.

A decent tax software program would just ask for the various boxes on the 1099-DIV
and put them all in the right places.

   Gary
692.2I Was RightI18N::GLANTZMon Mar 21 1994 02:016
    According to two of the mutual funds I own, "Dollars paid out,
    representing both interest and dividends earned and short-term capital
    gains, are categorized as Ordinary dividends and taxed as ordinary
    income.  Capital Gain dividends are paid out from gains on securities
    sold by the fund which were held for more than a year and taxed as long-
    term capital gains."