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From: rosen@gypsy.UUCP
Newsgroups: net.invest
Subject: Mutual Fund Sale Question
Message-ID: <29900009@gypsy.UUCP>
Date: Tue, 11-Mar-86 09:28:00 EST
Article-I.D.: gypsy.29900009
Posted: Tue Mar 11 09:28:00 1986
Date-Received: Fri, 14-Mar-86 03:50:28 EST
Lines: 46
Nf-ID: #N:gypsy:29900009:000:2194
Nf-From: gypsy!rosen    Mar 11 09:28:00 1986


I have a question concerning the purchase and sale of shares of a mutual
fund.  Hypothetically, lets make this a no-load fund currently selling at
$10 share on January 1, 1984.  My question concerns how capital gains are
computed on the sale of the fund shares at the end of some period in time.
The reason I am confused about this is because I am making the assumption
that captial gains/cash dividend distributions are always reinvested and I
am not quite sure how they figure into the final taxable amount.

Consider this schedule (ignore x-dividends and such):

1/1/84		BUY	100 @ $10		= $1000.00 (100 shares)

6/1/84		RECEIVE $110 CASH DIVIDEND
6/1/84		BUY	10 @ @ $11		= $1210.00 (110 shares)

12/1/84		RECEIVE $120 CAPITAL GAINS
12/1/84		BUY	10 @ $12		= $1440.00 (120 shares)

That's a pretty good fund isn't it? :-)

Now suppose when tax time comes around I pay my fair share of tax on the
capital gains and the cash dividends I've received.  Now I want to sell all of
the shares I own.

1/1/85		SELL	120 @ $13		= $1560.00 (120 shares)

How do I compute my capital gains on the sale of these shares?  Normally I
would just subtract the total purchase price of 1/1/84 from the sell price
of 1/1/85 which would be $560.  But unlike common stock, I have already
payed taxes on my distributions of the fund.  It wouldn't make sense to pay
tax on part of this amount twice.  Do I simply just subtract that out and I
really have a taxable amount of $560-$110-$120 = $330.  Is this right?  It
make sense to me, but it seems if I hold such a fund for 5 or ten years, I
have a hell of a lot (sort of) of accounting work to keep track of.  On
common stock I only have to remember what I orignally payed for it
(asssuming I take any dividends as cash).  I already know that the sale of a
mutual fund shares are taxable as a long term capital gain regardless of how
long I own it.  Does all this make sense?  I want to know before I entrench
myself in an accounting nightmare.  Or will most funds just send me a
complete list of all of my transactions I've made with them when I close out
my position in their fund?  That would be real nice, but I wouldn't count on
it.

S. Rosen
siemens!gypsy!rosen