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URL:  http://boards.fool.com/jp4me-writes-in-part-if-you-reinvest-the-11975851.aspx

Subject:  Re: Capital gains tax question Date:  2/12/2000  3:51 PM
Author:  Bob78164 Number:  28446 of 121333

jp4me writes (in part):

If you reinvest the dividends then there is no tax either( right )?

I reply:

Wrong, I'm afraid. The IRS treats reinvestments as though you have been paid the cash and immediately used it to purchase more shares. Thus, you owe tax immediately, but you have an additional purchase transaction (with its own holding period) that increases your basis in your holding. --Bob
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