OK people, if you wake up one morning to find your mutual fund has
dropped a bundle, the first thing to check is did your fund just pay a
dividend? Usually this time of the year mutual funds pay their
dividends, and your NAV will drop accordingly.
You are welcome.
"PeterL" <> wrote in message
news:
> OK people, if you wake up one morning to find your mutual fund has
> dropped a bundle, the first thing to check is did your fund just pay a
> dividend? Usually this time of the year mutual funds pay their
> dividends, and your NAV will drop accordingly.
>
> You are welcome.
>
Ed's answer is best.
(Chances are Ed will say it once, so let's ALL copy it)
It's not a dividend, it's a distribution. Distributions are made up of 1 to
3 parts. Long term capital gains, short term capital gains, and dividends.
Your fund is made up of mostly the stocks of different companies. These
stocks are bought and sold by the fund manager. If a stock is sold for more
than the fund paid for it, it generates a capital gain, the difference
between the buy and sell price, less expenses. If a stock pays a dividend,
this money is collected by the fund and paid out to shareholders at
predetermined intervals, usually annually for a stock fund. Capital gains
and dividends must be paid out to shareholders, the price of the shares will
drop by the amount paid out. If you elected to reinvest the distributions
you now have more shares in your account. If not, then however you directed
the distributions to go, when you set up the account, be it into a money
market,
or a check mailed directly to you.
Gary C wrote:
>
> "PeterL" <> wrote in message
> news:
> > OK people, if you wake up one morning to find your mutual fund has
> > dropped a bundle, the first thing to check is did your fund just pay
> > a dividend? Usually this time of the year mutual funds pay their
> > dividends, and your NAV will drop accordingly.
> >
> > You are welcome.
> >
>
> Ed's answer is best.
> (Chances are Ed will say it once, so let's ALL copy it)
>
> It's not a dividend, it's a distribution. Distributions are made up of
> 1 to 3 parts. Long term capital gains, short term capital gains, and
> dividends.
Instead, how about:
"DIVIDENDS from mutual funds may be of three types: income dividends,
short-term capital gains dividends and long-term capital gains"?
As much as Ed is wont to assert that distributions are not dividends,
I've posted twice correcting this.
news:
In the first post, I quoted Fairmark (a site that I find clearer and
truer to the tax code than are the IRS publications), saying that these
distributions are all dividends.
The second time, I gave quotes from IRS Publication 17, saying the same
thing.
One can continually claim that fund distributions of capital gains are
not dividends, but all the authorities, from Congress (tax code) to the
IRS (regulations and publications) to commentators agree that they are
dividends.
Since you do not seem to accept secondary sources like Fairmark and IRS
publications (which are not legally binding), I now quote directly from
original source - the tax code:
26 USC 852
Taxation of regulated investment companies [mutual funds] and their
shareholders
...
(b)(3) Capital Gains
(A) Imposition of tax
There is hereby imposed ... a tax ... on the excess ... of the net
capital gain over the deduction for DIVIDENDS paid (as defined in
section 561) determined with reference to capital gain DIVIDENDS only.
[That is, mutual funds are taxed on realized capital gains to the extent
that they do not distribute the gains as DIVIDENDS].
(B) Treatment of capital gain DIVIDENDS by shareholders
A capital gain DIVIDEND shall be treated by the shareholders as a gain
from the sale or exchange of a capital asset held for more than 1 year.
[That is, the DIVIDEND you receive from the mutual fund is taxed AS IF
it were a long term capital gain.]
(C) Definition of capital gain DIVIDEND
....[A] capital gain DIVIDEND is any DIVIDEND, or part thereof, which is
designated by the company [mutual fund] as a capital gain DIVIDEND ...
[Rather circular here; that's the tax code for you.]
--
Mark Freeland
"Mark Freeland" <> wrote
> As much as Ed is wont to assert that distributions are not dividends,
> I've posted twice correcting this.
I diisagree and prefer "distribution". I don't care how many times you post
it, I won't change my mind.
IRS agrees with me:
While not a true dividend, fund distributions do often get referred to as
"dividends". Distribution corrected data is commonly termed "dividend"
corrected data, a term which unfortunately leads to the misunderstanding.
Take your pick......
This is the season where Happy Guy just loves tax free and tax deferred
accounts.. and new investors with taxable accts think they've made money
because they get a 1099 form from their mutual fund....
Happy Guy, "Laissez les bons temps roulez"
..
"Ed" <> wrote in message
news:
>
> "Mark Freeland" <> wrote
>
>> As much as Ed is wont to assert that distributions are not dividends,
>> I've posted twice correcting this.
>
> I diisagree and prefer "distribution".
As Archie Bunker would say .... what ever!
What ever you call 'em, they cause the NAV to drop and taxes will be owed
on 'em if held in a taxable account.
Now I'm getting scared... I agree with GaryC../g/
Who gives a rat's ass what they are, you still pay tax on them... and since
it is done yearly I'm not sure anything is long-term... but am not
sure...... but then, I really don't care...
When people get bored, they start debating semantics.... I also find when
this focus on the small crap starts, people lose track of the big and
important stuff.
I know a fairly unsuccessful person whose main concern seems to be that with
the new 1.5 gallon flush toilet he sometimes has to hold the handle down or
flush twice...
Happy Guy, "Laissez les bons temps roulez"
..
..
"Gary C" <> wrote in message
news:0Jznf.31151>
> As Archie Bunker would say .... what ever!
>
> What ever you call 'em, they cause the NAV to drop and taxes will be owed
> on 'em if held in a taxable account.
>
happy-guy <> wrote:
> This is the season where Happy Guy just loves tax free and tax deferred
> accounts.. and new investors with taxable accts think they've made money
> because they get a 1099 form from their mutual fund....
Ok Happy Guy,
I have to hit you put up with another question since I've been drooling
over your returns on your timer website.
What sort of tax free/deferred accounts can you have? All I'm aware of
are:
- IRA's
- Roth IRA's
- 401k's
And 401k's generally don't come with long/short funds like you use.
-Mike
Are all these confused people Fidelity users?
Becuase the change since purchased value on fidelity.com for your
mutual fund will show negative values and daily drops when the
disbursment is done.
Wtf is wrong with you people? Do you really inveset all your
money into mutual funds and not know the basics of how they
work?
-Mike
I have a ROTH, an IRA Rollover, a self-directed annuity and a gift2minor
acct I trade. Some don't like annuities (probably because there are many
types and they don't understand them), but mine cost me 1.4% per year, and
has exactly the same profunds available at it (Prudential American Skandia)
that I trade in all my accounts, and I can trade it as much as I want...
and, biggie, it is tax-deferred... so all those dividends cum distributions
I used to get hit with a year-end are history. And all trading profits only
get taxed if/when I take them out....
You are right. Also, 401k's usually have limited choices, but even with
that, if you can time them (which you may not be able to with restrictions
on trading), you could at least go to money market when the market looked
sick (capital preservation).
I was fortunate, back when I was working long ago, my company matched my
401k (which I made max contributions to) dollar for dollar... I could never
figure out why people would not take advantage of an immediate 100% profit
on their money...... at my 'good-bye' luncheon, I even pointed out the
reason I could afford to retire so young was my 401k... one woman said, good
idea, I think I'll start putting 1% in.... the max was 5.5%... some are just
not money smart.
You
Happy Guy, "Laissez les bons temps roulez"
> And 401k's generally don't come with long/short funds like you use.
happy-guy <> wrote:
> I was fortunate, back when I was working long ago, my company matched my
> 401k (which I made max contributions to) dollar for dollar... I could never
> figure out why people would not take advantage of an immediate 100% profit
> on their money...... at my 'good-bye' luncheon, I even pointed out the
> reason I could afford to retire so young was my 401k... one woman said, good
> idea, I think I'll start putting 1% in.... the max was 5.5%... some are just
> not money smart.
Yeah, I've got some crappy selections with my 401k but still invest in it
for the match. The match & pre-tax is the only reason I do it. Our S&P
500 fund somehow doesn't even keep up with the S&P 500 usually.
The big upside is that whenever I change my job I get to roll it over into
my IRA at Fidelity.
Now if only someone would pass a law that'd let me convert my IRA into a ROTH
for free...I'll be home free.
-Mike
"Mike Stone" <> wrote in message news:ntEnf.187195>
> What sort of tax free/deferred accounts can you have? All I'm aware of
> are:
>
> - IRA's
> - Roth IRA's
> - 401k's
Roth 401k's (in a month)
SIMPLE
SEP-IRA
KEOGHs (Keep Everything Out of Government's Hands)
covers KEOGHs,
and gives links to SIMPLE and SEP-IRA descriptions
TDAs (tax-deferred annuities)
403(b)
457
--
Mark Freeland
Ed wrote:
>
> "Mark Freeland" <> wrote
>
> > As much as Ed is wont to assert that distributions are not dividends,
> > I've posted twice correcting this.
>
> I diisagree and prefer "distribution". I don't care how many times you
> post it, I won't change my mind.
You can call them anything you want - Santa Claus makes distributions,
too, though the IRS, when it chooses to be precise, says that Yuletide
packages are gifts. When the IRS gets folksy, as it tends to do in its
publications for the masses (as contrasted with its regulations, which
have the force of law), it often calls these distributions, as you have
discovered:
> IRS agrees with me:
>
When we read this publication closely, we see:
"Capital Gains Distributions. ... The Form 1099-DIV (box 2a) you receive
.... will tell you the amount to report as a capital gain distribution."
So, we follow the trail, and look at what the IRS says about form
1099-DIV:
"File Form 1099-DIV, Dividends and Distributions for each person to whom
you have paid dividends (including CAPITAL GAINS DIVIDENDS)"
The form is indeed called Dividends and Distributions; there's even a
box on the form labeled Nondividend Distributions. But that's box 3,
which is not where the capital gains are reported.
The other posters are right - one can call things whatever one wants.
One cannot, however, say that someone who calls these distributions
capital gains dividends is wrong, for that person is not wrong.
Since the only fund distribution you want to call a "dividend" is an
underlying stock dividend, shouldn't you be pounding the pavement
protesting all the interest payments from bond and MM funds that are
called fund "dividends", and show up as dividends on 1099-DIV's rather
than as interest on 1099-INT's?
Hey, I've got an idea. Why don't you call these "distributions"? :-)
--
Mark Freeland
Hahaha, I was waiting to see how long it would take you to come back with
the title of the form!
1099-DIV.
I think they should have one each:
1099-DIV
1099-STG
1099-LTG
1099-INT
Only kidding.
"Mark Freeland" <> wrote
> The other posters are right - one can call things whatever one wants.
> One cannot, however, say that someone who calls these distributions
> capital gains dividends is wrong, for that person is not wrong.
We agree. Distributions is just my preference. It really doesn't matter what
they are called.
I prefer 'distributions' because I think it's easier to explain the
differences between them than if they were all called 'dividends'.
Not sure, since I don't get them anymore, and being a late comer to this
conversation, aren't they both? Or are there 2 forms.... dividends are a
return paid on an investment, distributions are gains made from buying &
selling... so a stock might pay a dividend, but not sure if it will ever
have a distribution under normal circumstances.... funds have both dividends
(from stocks they hold) and distributions because the buy and sell stocks
and could have gains to distribute.
This is really sad, I never thought I be so bored I'd get involved in one of
these discussions.... just throw another log into the wood stove, Harvey,
and let's talk about politics... spring will be here soon... BRRRRR, sure is
a cold one out there today, eh?
Happy Guy, "Laissez les bons temps roulez"
..