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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Re: Distributions Help Date: 12/9/2005 2:11 AM
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I bought American Century Target Maturities Fund(BTTTX, BTFTX) in August this year; they have since been trailing by 4%. On December 16, there will be distributions in the amount of $4.53 (capital gains & dividends) per share (BTFTX); the current NAV is $75.03. Does it make sense to sell before the 16th and reinvest after 31 days to avoid paying taxes on a fund I basically only have a loss?

Since Miss Cleo won't answer my call, my crystal ball is at the cleaners, and my Magic 8 Ball just fell on the floor, I'm gonna have to go with "maybe."

Here's what you need to know that isn't in your post, but should be available to you (no need to post it here).

In all calculations, don't forget to include load.

First, work in total $$, not in per share figures. The difference between the effect of 1 share vs 1000 is obvious.

Second, you need to know how much of the $4.53 is capital gain and how much is dividend.

Now you know what 2005 taxable income you'll have from the distribution. Compute the tax (don't forget the Governor) and you know how much holding will cost you in 2005 income tax.

Now compute your loss if you sell and the effect of that on your 2005 tax. Now you know how much selling will "save" you.

Now you try the Psychic Hot Line to find out how much it will cost you to re-establish your position after the wash sale waiting period. You are now equipped to make your rational decision.

Me, I'd flip a coin if the idea to consdier this even popped into my mind. I'd just ask my standard "does this investment meet my current investment criteria?" and be done with it. I'll spend hours making sure I don't send an extra penny in estimated tax, but after riding a stock all the way down from a pretty good short-term gain to a carryover long-term loss, I've pretty much sworn off on tax timing.

Phil
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