In misc.taxes.moderated, Steve Pope wrote:

- quote -

In open end funds (your typical mutual fund), net positive capital
gains are paid out, and may be reinvested. This year CG
distributions will be a rare occurrence.

http://www.fairmark.com/mutual/cgdist.htm

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

removeps-groups[at]yahoo.com <removeps-groups[at]yahoo.com> wrote:

- quote -

Yes. I should have pointed out this is an open-end fund, and
so (as is typical for open-end funds) the cap gains stayed
within the fund. In a closed end fund, they get paid out
as a distribution (which may or may not be reinvested).

- quote -

In this case the TP sold the entire holding.

- quote -

Steve

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Dec 26, 8:04 pm, spop...[at]speedymail.org (Steve Pope) wrote:

- quote -

Were the capital gains also re-invested? If so, the re-invested
amount should also be added to the cost basis.

- quote -

Does one really need to allocate? Say shares were purchased on the
3rd of each month from Jan/03 to Jul/08, and the entire holdings sold
on Jul/15/08. Then the re-invested dividends from Jul/15/07 to Jul/
15/08 are short term. The rest is long term. If you didn't sell all
the holdings, then can you choose between LIFO and FIFO?

Also, in the example above the fund might pay a reduced dividend for
the 3rd to 15th on Aug/3/2008.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Arthur Kamlet <-To[at]panix.com> wrote:

- quote -

Correct. As I said they're reported on "Page 1". I'm sure
it's been Line 8b for at least the last ten years, but beyond
that my memory is foggy.

- quote -

Thanks, this is not too difficult to do, although some
straight-line-type estimation will necessarily be involved,
since the sale occured mid-year.

Steve

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <gj46ui$oem$1[at]blue.rahul.net> ,
Steve Pope <spope33[at]speedymail.org> wrote:
- quote -


Those tax exempt dividends should have ben reported on Form 1040
Line 8b where they can have effects on other items. They might
increase social security taxability, they might affect any earned
income credit, they could afect AMT, they could increase the
Medicare B Surcharge, and other factors.




- quote -


You are correct. If 1% of your shares were short term, then
allocate 1% of the sales amount to short term, and 99% to long
term.
--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Herb Smith <smithff33[at]aol.com> wrote:

- quote -

Thanks.

There is one other subtlety that I was wondering about: the
above describes the correct basis, but reporting the entire
gain as long term capital gain seems not entirely correct,
because some small fraction of the reinvested interest and
capital gain distributions occured less than a year before
the position was sold.

It's not a large fraction, but I'm wondering if this fraction
needs to be calculated and separated out as a short-term gain.

Opinions?

Steve

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Dec 26, 6:25�pm, spop...[at]speedymail.org (Steve Pope) wrote:
- quote -

You are correct. Your basis is comprised of original purchase price,
reinvested capital gain distributions, and reinvested tax exempt
interest dividends. Don't forget to include the shares purchased with
these reinvested funds in your share total.

In other words, exactly the same as for a taxable mutual fund.

The only subtlety I can discern is that you pay no tax on the
dividends, AND you reduce your capital gains when you sell the
reinvested tax free shares.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

(1) TP bought a tax-free municipal bond mutual fund in 1993, selling
it in 2008. During this interval all dividends paid by the
fund were re-invested (and were reported as tax-free interest
on Page 1 of form 1040), and capital gains internal to the fund
were reported as income on the appropriate form.

Is the basis of the fund be the sum of the original purchase
price, plus the tax-free interest, plus the capital gains?
Are there any subtleties involved beyond this?

(2) TP bought in the secondary market a tax-free, zero coupon
municipal bond, then sold it a couple years later before it matured.
The broker has not reported any OID associated with this bond.

Research determines this zero was a stripped component of a bond
issued at 4% coupon on a certain date. Is it acceptable to calculate
that the basis of this bond is the purchase price, plus an OID amount
calculated as follows:

OID = (face amount) * (1/(1.04 ^ T1)) - 1/(1.04 ^ T2))

where

T1 = number of years (including fractions) from sale date to
maturity data

T2 = number of years (including fractions) from purchase date to
maturity data

^ is the power operator.


The above formula makes sense to me (from a bond investor
perspective), but is a method like this good to use for tax purposes,
or is some other method preferred/required?

Steve

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >