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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: James Clarke who wrote (9402)	12/26/1999 6:45:00 PM
From: Investor2	Respond to of 78507

Re: "Example. You Buy REIT ABC for $20 and they pay a $2 dividend, 50 cents of which is a return of capital. You would be taxed on $1.50 of current income. Then you would reduce your basis by 50 cents to $19.50 and pay tax on that 50 cents when you sell the stock at the capital gains rate." 1. Let's assume that the above example is repeated year after year. After a number of years, the cost basis is zero, or perhaps even negative. Doesn't this essentially tie one into holding the REIT forever, due to the large capital gains liability if one sells? 2. Does the same scenario you described in your example also occur for mutual funds of REITs? Thanks, I2