Message Font: Serif | Sans-Serif
No. of Recommendations: 0
Greetings, Beachguy75, and welcome. You wrote:

<<I am a new fool who has been following the market for about 5 years. I'm only 24, but my question is on behalf of my grandmother. We were having dinner last night and she was showing me her 6 month report on her mutual fund investments from her financial advisor. She felt that she has been paying too much on taxes over the last few years and was asking me why. I know that when you sell shares of stocks, you will be taxed on the gains even if reinvest in other stocks. Is this the same for mutual funds?>>

Yes, when the fund is sold to buy another, it's the same as selling shares of stock. There will be a taxable event based on any gain in price of the fund while the fund was held. Also, during the year the fund will pay out dividends based on capital gains, dividends and interest it has received on its holdings during the year. Fund dividends are also taxable in the year received.

<<Her advisor moves her money around almost monthly, but always stays in the same fund family (I don't agree with his choices, but that's another story). Will she be taxed on gains from each time shares are sold to buy shares in another fund? Any assistance will help. >>

IMHO this sounds suspiciously like a classic instance of churning so the advisor can earn commission money. Changing funds on a monthly basis is far, far too often. Your grandmom should vigorously question such activity and complain to the brokerage involved. It's expensive to her both in fees and in the income tax burden she has mentioned.


Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.