REINVESTED DIVIDENDS TAXABLE ?
falc...@starnetinc.com
I have two ira funds that are of no concern with regards to taxes
however i have a bond fund that pays monthly dividends which i have
chosen to automatically reinvest by purchasing more shares of same
fund. I understand if these dividend checks were taken in form of cash
each month it is taxable income. When the money stays in the fund in
the form of reinvested shares is this still reportable income ? Also
the growth on a standard mutual fund, if money is not taken out is
this something I have to be concerned with ? Thanks in advance for any
comments.
Kevin Falconer Hoffman Estates, IL
Michael Donohoe
Only if the dividends are in a 'qualified' plan or insurance contract or custodial account, like an
IRA or 401 (k), 403 (b) or 457, are they tax deferred. All other dividends are taxable. Because
*you* elect to reinvest them does not qualify them for tax forgiveness. A rule of thumb might be
that whenever you control the money it is taxable, if a plan administrator or IRA custodian controls
the money flow, then there is deferral until the money is withdrawn from the contract/plan/account.
And have you noticed that the dividend reinvestment plans', the DRIPs', custodian fees are creeping
up? Used to be a dollar on most of mine and now they are two dollars. And if I send in a few
hundred I get smacked with a five dollar fee. It make me much more careful about how much I send and
how often. I'm about ready to have my dividends sent to me and buy stocks I like at $7 with
Scottsdale or someone else. The DRIP is no longer as compelling as it used to be for us small
investors.
__/)~~Mickey__/)~~
falc...@starnetinc.com wrote:
--
Michael Donohoe, Partner
mdon...@worldnet.att.com
Seaholm Chesapeake Charters
http://home.att.net/~mdonohoe
Phil Marti
>I have two ira funds that are of no concern with regards to taxes
>however i have a bond fund that pays monthly dividends which i have
>chosen to automatically reinvest by purchasing more shares of same
>fund. I understand if these dividend checks were taken in form of cash
>each month it is taxable income. When the money stays in the fund in
>the form of reinvested shares is this still reportable income ? Also
>the growth on a standard mutual fund, if money is not taken out is
>this something I have to be concerned with ?
The dividends are taxable income in the year issued, even if they are
reinvested in additional shares. The reinvestment increases your basis (and
number of shares). Gain in the value of the shares you continue to hold is not
taxed until you sell them.
Phil Marti
Liz G
all of the shares of the fund. Dividends (reinvested or not), long-term &
short-term cap. gains are all taxable income. Hope this helps. Liz
falc...@starnetinc.com wrote in message
<36c43...@news1.starnetinc.com>...
>
>I have two ira funds that are of no concern with regards to taxes
>however i have a bond fund that pays monthly dividends which i have
>chosen to automatically reinvest by purchasing more shares of same
>fund. I understand if these dividend checks were taken in form of cash
>each month it is taxable income. When the money stays in the fund in
>the form of reinvested shares is this still reportable income ? Also
>the growth on a standard mutual fund, if money is not taken out is
Ed
of the fund is not taxable until you sell it.
Rich Carreiro
>however i have a bond fund that pays monthly dividends which i have
>chosen to automatically reinvest by purchasing more shares of same
>fund. I understand if these dividend checks were taken in form of cash
>each month it is taxable income.
Yes.
>When the money stays in the fund in
>the form of reinvested shares is this still reportable income ?
Absolutely!
There is nothing magic about reinvestments. Economically and
tax-wise, all a reinvestment is is the fund handing you a check
and you giving the check right back to them to buy more shares.
Reinvestments are just like any other purchases, and the distributions
that get reinvested are just like any other distributions.
>the growth on a standard mutual fund, if money is not taken out is
>this something I have to be concerned with ?
I'm not sure what you're asking, but the increase in NAV of the fund
shares is not taxed until you sell and realize the gains (same for
decreases in NAV).
--
Rich Carreiro
rlc...@animato.pn.com
P5-100/RedHat Linux 4.2
cjt&trefoil
<snip>
> And have you noticed that the dividend reinvestment plans', the DRIPs', custodian fees are creeping
> up? Used to be a dollar on most of mine and now they are two dollars. And if I send in a few
> hundred I get smacked with a five dollar fee. It make me much more careful about how much I send and
> how often. I'm about ready to have my dividends sent to me and buy stocks I like at $7 with
> Scottsdale or someone else. The DRIP is no longer as compelling as it used to be for us small
> investors.
Amen. I've pulled out of all the ones I was in. Not only are they a
pain in the *ss at tax time, for many of them the fees were getting to
be more than I would have to pay a broker to get the stock.
JMHO.
Joe Norton
to keep track of them for when you sell the fund. These additional
purchases increase the Tax Base of your investment in the Fund.
--
Joe Norton
Ringwood, NJ
jfno...@mail.eclipse.net
<falc...@starnetinc.com> wrote in message
news:36c43...@news1.starnetinc.com...
|
|I have two ira funds that are of no concern with regards to taxes
|however i have a bond fund that pays monthly dividends which i have
|chosen to automatically reinvest by purchasing more shares of same
|fund. I understand if these dividend checks were taken in form of cash
|each month it is taxable income. When the money stays in the fund in
|the form of reinvested shares is this still reportable income ?
|