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cap gains distributions “The art is not in making money, but in keeping it.” Proverb

Many individuals purchase mutual funds in the stock market for investment purposes to grow their wealth. Now is the time of year when investors who use mutual funds for their investments can check when or if their mutual fund will be paying year–end distributions of Capital Gains.  

Very simply put mutual funds are required to pay out their net investment income to avoid taxes. Mutual funds declare dividends and capital gains distributions mostly in December of each year to avoid those taxes, but some pay out in November.  An individual pays capital gains on their investments in taxable accounts.

What is a capital gain?

A capital gain is a profit made from the sale of any investment where the sale price exceeds the purchase price.

If you lost money on an investment and have sold it, then you have incurred a capital loss.

Should You Sell or Exchange Your Shares to Avoid a Capital Gains Distribution?

Every individual investment are different, as well as what an individual pays in taxes so I recommend you consult your tax or financial advisor for guidance.  Some investors who create a tax plan focuses on deferring the sale of profitable investments until the discounted long-term capital gains tax rate can be taken.

Investors need to keep track of their investments. This information is essential for calculating the amount of capital gain you have. You need to know what you bought, how much you invested, your brokerage fees and commissions, and when you bought the investment. You also need to know date of sale for your investment, the gross proceeds from the sale, and any fees or commissions you paid to sell. This information is on your trade confirmations and will be used when preparing your tax return.

Most brokerage houses give a year end summary that you can give to your accountant or tax advisor which is a good idea to keep for your records. This document is sent out by mail or E mailed to you (if you have signed up for this) in late January or sometimes  late  February depending on what type of investments you purchased.

The shares of a mutual fund held in taxable accounts, short-term capital gains distributions are taxed to individuals at ordinary income rates. The short-term holding period is one year or less. Short-term capital gains are taxed at ordinary income tax rates, which can range from 10% to 39.6% for the year 2013. (check with you accountant on your rate)

Long term capital gains distributions are generally taxed at long term capital gain rates no matter how long shares have been held. The long-term holding period is more than one year. Long-term capital gains are taxed at long-term capital gains rates, which is usually less than ordinary tax rates. The long-term capital gains tax rate ranges from 0 – 20%, depending on your marginal tax bracket of the amount of money you make.

Simple Example of Long Term Capital Gain:

  • Description of Security   100 shares ABC Mutual Fund
  • Date Bought 1/3/2011
  • Buy Price $1000
  • Buy Commission $25
  • Date Sold 2/28/2012
  • Sell Price $1350
  • Sell Commission $25
  • Cost Basis = $1050 ($1000 + $25 + $25) (Buy Price + Buy and Sell Commission)
  • Capital Gain $ 300 = Sell Price – Cost Basis   $1350-$1050 = $300 Long Term Capital Gain.

 

It would have been a short term gain if the investment was sold less than one year after purchase. Mutual funds can make cap gains distributions even if the fund has lost money for the year.  With so many distributions being paid in the last quarter of the year, if you are a mutual fund investor, it’s a good idea before you buy a mutual fund to call your mutual fund company or look on the website to see when the expected mutual fund pay date is, (they are subject to change) so you do not have to pay tax this year without capitalizing on the performance gain.  Mutual funds give year end estimates of the 2013 distributions for your review   to help with year-end planning,

Be prepared; take responsibility of your finances. Mutual funds can be the investment that will lead you on your journey to wealth and sustain financial security but it’s up to you to keep track of the documents necessary to report to the government each year.

 

Learn more at https://www.fidelity.com/viewpoints/personal-finance/taxpayers-guide

 

To discover how to achieve your financial dreams click here

Visit www.BGJourneyToWealth.com for more insights to growing your wealth!

Bonnie Gortler (@optiongirl) is a successful stock market guru who is passionate about teaching others about social media, weight loss and wealth. Over her 30-year corporate career, she has been instrumental in managing multi-million dollar client portfolios within a top rated investment firm. Bonnie is a uniquely multi-talented woman who believes that honesty, loyalty and perseverance are the keys to success. You will constantly find her displaying these beliefs due to her winning spirit and ‘You Can Do It’ attitude. Bonnie is a huge sports fan that has successfully lost over 70 pounds by applying the many lessons learned through her ongoing commitment toward personal growth and development while continually encouraging others to reach their goals & dreams. It is within her latest book project, “Journey to Wealth”, where Bonnie has made it her mission to help everyone learn the steps needed to gain sustainable wealth and personal prosperity. Order your copy of ”Journey to Wealth” today!

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Bonnie Gortler
Bonnie Gortler
Bonnie Gortler, the Inspired Wealth & Well-Being Coach, is a successful stock market expert who has been instrumental in managing multi-million dollar client portfolios within a top rated investment firm during her over 30 year corporate career. As the author of "Journey to Wealth", Bonnie has made it her mission to share the importance of risk management and how to enjoy true financial well-being by applying the technical and mental sides of investing. Bonnie has a M.B.A. in Business Administration and is a certified life coach. She is a huge sports fan who believes in healthy eating and has an unyielding passion for fitness. It is through her love of social media, blogging, coaching that she is able to create change in the lives of many and inspire people from around the world.

Bonnie is fully committed to your personal growth and development as she shares her winning spirit and powerful techniques with you. Visit BonnieGortler.com to gain tips and insights surrounding investing, healthy eating, personal development and inspiration through her writings on Wealth and Well-Being. Live the healthy, wealthy lifestyle you desire.


~ Connect via LinkedInTwitterPinterest & Facebook
~ Choose your very own FREE down-loadable gift by visiting Bonnie's Offers
~ Subscribe to BonnieGortler.com
~ Order your copy of "Journey to Wealth" today!


Like this post? Feel free to use it in your blog or ezine as long as you use the above signature in its entirety.

 
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Bonnie Gortler

Bonnie Gortler, the Inspired Wealth & Well-Being Coach, is a successful stock market expert who has been instrumental in managing multi-million dollar client portfolios within a top rated investment firm during her over 30 year corporate career. As the author of "Journey to Wealth", Bonnie has made it her mission to share the importance of risk management and how to enjoy true financial well-being by applying the technical and mental sides of investing. Bonnie has a M.B.A. in Business Administration and is a certified life coach. She is a huge sports fan who believes in healthy eating and has an unyielding passion for fitness. It is through her love of social media, blogging, coaching that she is able to create change in the lives of many and inspire people from around the world. Bonnie is fully committed to your personal growth and development as she shares her winning spirit and powerful techniques with you. Visit BonnieGortler.com to gain tips and insights surrounding investing, healthy eating, personal development and inspiration through her writings on Wealth and Well-Being. Live the healthy, wealthy lifestyle you desire. ~ Connect via LinkedInTwitterPinterest & Facebook~ Choose your very own FREE down-loadable gift by visiting Bonnie's Offers~ Subscribe to BonnieGortler.com~ Order your copy of "Journey to Wealth" today! Like this post? Feel free to use it in your blog or ezine as long as you use the above signature in its entirety.  

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