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From: okin@sun.uucp (Ken Okin)
Newsgroups: net.invest
Subject: Re: Mutual Fund Sale Question
Message-ID: <3360@sun.uucp>
Date: Thu, 13-Mar-86 21:52:02 EST
Article-I.D.: sun.3360
Posted: Thu Mar 13 21:52:02 1986
Date-Received: Sat, 15-Mar-86 20:57:26 EST
References: <29900009@gypsy.UUCP>
Organization: Sun Microsystems, Inc.
Lines: 78

> 
> 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

	You have to treat each purchase event separately at the time of 
the sale. So for your 1985 taxes, you figure it this way:

	# shares  Price/share	Cost		Sell 		Cap gains
	100		10	1000		1300		300
	 10		11	 110		 130		 20
	 10		12	 120		 130		 10
total 	-----			----		----		---
	120			1230		1560		330

Don't forget that you have to declare the $110 dividend and the $120 capital
gains on 1984's tax forms.

Also all these sales are long term gap gains.  If you had held some of 
them for less than 6 months, the profits attributable to them would have
short term cap gains.  Life is even more interesting here in California, 
where there are short term (<1 year), intermediate term (1-5 years) and
long term (>5), vs the Feds where >6 months is long term.

> I have a hell of a lot (sort of) of accounting work to keep track of.  On

	Yup.  That's why some people pay accountants.  I have a spereadsheet
I use for keeping track of a Cal Tax Free fund whose asset value fluctates
and where I'm constatnly buying and selling as I need or have extra funds.

> 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

	Are you sure??  I'm no tax expert, but I don't know of any
tax relief given to mutual funds.  Can you cite a reference?


> 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.

	I've got some Dreyfus  funds.  They send quarterly accounting
of transactions but they can't figure the cap gains for you since it's
your choice which shares you decide to sell if you liquidate only part of 
your holding.

> 
> S. Rosen
> siemens!gypsy!rosen

				Ken Okin (sun!niko!okin)