"Rich Carreiro" <rlcarr[at]animato.arlington.ma.us> wrote in message
news:m3fyjf9wp8.fsf[at]animato.home.lan...
- quote -

While the rates may go up, I don't think they'll go away. In addition to
simply reducing taxes, accounting transparency was one of the arguments
for the rate change. My (probably naive) understanding is that it made the
decision for a company to pay dividends or not, a tax-neutral question.
Since paying dividends requires actual cash, dividend-paying companies
would find it harder to obscure financial problems than those not paying
dividends. Since there no longer is a tax benefit to not paying dividends,
investors would question why companies don't.

"Andy" <ineverevercheckthismailbox[at]yahoo.com> writes:

- quote -

Yes. That's exactly what capital gain distributions from a
mutual fund are.

- quote -

No. You get taxed on capital gain distributions, dividend
distributions (each year as they come) and are taxed on your
price appreciation when you sell.

However, there is no double tax because when a fund makes
a distribution, its NAV drops by the per-share amount of
the distribution. In other words, the distributions make
the ultimate gain on sale smaller than it would have been
without the distribution, with the net result that ultimately
the same amount of gain gets taxed, but it works out that
some gets taxed now and some gets taxed at the end, instead
of all of it being taxed at the end.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

Douglas Johnson wrote:
- quote -

Thanks. Those are the issues I was wondering about. I do have a dumb
follow-up question though. If I buy a S&P 500 index mutual fund in a
taxable account, do I get taxed each year on my share of all of the
fund's captial gains from stocks they sell that year, or do I only get
taxed on my net gain when I cash out my mutual fund shares? I feel
ignorant for asking this question, but I have had all my mutual funds
inside my 401K account so far.

Thanks,

Andy

joetaxpayer <joetaxpayer[at]nospam.com> writes:

- quote -

This may be getting too close to a verboten political discussion, but I
don't believe one can act as if the 5%/15% rates are set in stone.
In fact (despite their now being likely locked in until 2011), both
for reasons of a likely Democrat takeover in 2006 and 2008, and general
macroeconomic conditions, I think LTCG rates will become significantly
higher than they are now in both the mid-term (5-10 years) and the
long term (20+ years). True, they will probably remain lower than
ordinary income rates, but I think the difference will be significantly
narrowed. And I think the 5/15 rate for dividends will disappear
altogether. So I don't think it's quite as disadvantageous to purchase
capital gain assets in a 401(k) because I think much of the advantage
of them will be gone by the time withdrawals are made.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

joetaxpayer <joetaxpayer[at]nospam.com> wrote:

- quote -


Expanding on this, you should hold tax efficient funds (such as an S&P 500
index) in taxable accounts. With low turnover, almost all gains will be taxed
at 15%. You should hold tax inefficient funds (such as CGM Focus) in a 401K or
other tax deferred account.

How do you know if it is tax efficient? Look at the turnover. Lower is more
efficient. Turnover is the percentage of the fund's portfolio that is sold each
year. Also look at the amount of short term gains that the fund pays. Lower is
more efficient.

This assumes we are talking about mutual funds. If we are talking about
individual stocks, it will depend on your strategy. Short term trading
portfolios should be in tax deferred accounts. Long term portfolios should be
in taxable accounts.

-- Doug

Andy wrote:

- quote -

Well, the first thing that comes to mind is that the 401(k) will turn
any gains into ordinary income. Outside of the 401, long term gains are
taxed at 5% or 15%, but the 401 withdrawals are at the marginal tax rate.

JOE

On Thu, 11 May 2006 19:18:59 -0500, Andy <ineverevercheckthismailbox[at]yahoo.com> wrote:
- quote -

In a 401k, you incur no cost from switching from one fund to
another. There are no capital gains taxes payable if you switch from a
fund where you have a capital gain. These would be the advantages.

In a regular brokerage account, you have more choices of what you can
buy, such as individual stocks or options or exchange traded funds.


i

"Andy" <ineverevercheckthismailbox[at]yahoo.com> wrote in message
news:1147393106.755087.115060[at]q12g2000cwa.googlegroups.com...
- quote -

Important data to allow readers to offer meaningful advice might be your
age and years to retirement. Also, tax bracket, % of your total portfolio
inside the 401K vs. outside, and % of your portfolio in equities vs. bonds
or cash equivalents.

Hi:

My wife and I have been thinking of increasing the portion of our
portfolio in equities. We have a fair amount of money in T-Bills, CDs,
etc. and we also have a fair amount of money in a money market fund in
my 401K account, so we could add to our equity holdings either inside
the 401K account or as part of our regular investments. My question
is, what are the pros and cons of investing in equities within a 401K
account as compared to investing in equities outside the 401K? Is there
any reason to prefer one avenue over the other?

Thanks,

Andy