Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: ehasfjord who wrote (61012)	8/10/2002 5:36:55 PM
From: rkral	Read Replies (1) \| Respond to of 77400

OT...ehasford, re mutual funds & double taxation You forget that you have already paid taxes on the funds that you invested [edit: in mutual funds.] You forget that you have already paid taxes on the funds that you invest .. in *either mutual funds or stocks. The exception, of course, is a tax-deferred account, 401(k), IRA, etc. Now, you are also paying taxes on the distributions that that fund must make.* Here you are close to a valid "double taxation" point .. but you failed to make it. If you invest in mutual funds shortly before a distribution, part of the distribution is truly just a return of your investment .. yet you owe taxes, according to Uncle Sam. That's crappy, I agree. But knowledge allows one to mitigate this effect .. by investing shortly after distributions .. or, if you are thinking about investing just before a distribution, by asking the fund what the distribution amount is likely to be and acting accordingly .. or investing in mutual funds in a tax-deferred account. Even though the funds value may go down it doesn't make a difference if the fund sold "stuff" that had gone up in value. Therein lies the double taxation. Well, if you buy both CSCO and JPM .. CSCO goes up .. JPM goes down .. you sell CSCO. You pay taxes on your CSCO profit even though JPM went down. Same difference. You don't get to recognize the loss until either the mutual fund or the stock is sold at a loss. On a more serious note, your "double taxation" claim seems to depend upon a down market .. my "single taxation" claim on an up market. Admittedly, I didn't consider the down market in my previous post. I suggest we dispense with the up-market case before proceeding to the down-market case. What point(s) in my up-market argument didn't you agree with? Ron