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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 76.33

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1:51 PM EST

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To: RetiredNow who wrote (60988)	8/9/2002 9:59:34 AM
From: rkral	Read Replies (2) of 77400

OT...mindmeld, re mutual funds & double taxation So we pay taxes on the churn of stocks in the mutual fund and pay again on the rise in net asset value on the mutual fund. I submit there is no double taxation. Let's run some per-share numbers. You invest in 1 share of a no-load mutual fund at $100. (You do this on Jan 1 to avoid getting a distribution too soon after investment.) During the first year, you receive $20 in distributions which you re-invest at $200. You pay tax on the $20 .. now own 1.1 shares with a cost basis of $120. During the second year, you sell your 1.1 shares for $330 total, i.e., $300 per share. You now owe taxes on $210. In summary, you gained $230 ($330-$100) and pay taxes on $230 ($20+$210). So I again ask, where is the double taxation? IMHO, the real abuses in mutual funds are 1) 12b-1 fees, 2) high load charges. In addition, the hazards are investing shortly before a distribution and tax inefficiencies because of churn. But correct choices can obviate or mitigate all of these. Ron

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