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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121570  
Subject: Re: Mutual Fund Selloff Date: 10/6/1997 12:27 PM
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<<I still have one or two mutual funds which I would like to sell and begin managing the funds myself. The funds have appreciated significantly over the years. I know the rule of thumb that says not to buy funds just prior to earnings disbursements at the end of the year, but is there a rule of thumb about the best time to sell?

Also, if I'll be in a higher tax bracket this year than next year, does this change the situation?>>

I sure don't know about any rule of thumb about when to sell. You would certainly want to time your sale (it at all possible) prior to any dividend distributions, since the distributions may be taxed (at least partially) at your marginal tax rate, whereas your sale of the shares would (I assume at least an 18 month holding period on the vast majority of the shares)be taxed at a maximum capital gains rate of 20%. So your focus and issue would be on the distributions.

Obviously, if you have reinvested dividends, some of your gain will be treated as a short term capital gain, taxable at your marginal tax rate. But even with reinvested dividends, much of your gain (again, assuming at least an 18 month holding period) will be taxed at the 20% maximum tax rate as provided for in the 1997 tax act.

Finally, the timing of your sale will most likely be predicated on your holding period. The more of your gain that can be pushed into the 20% rate, the better. And the more that you can push into the 20% rate, the more meaningless the year of sale becomes. But if your gains will be taxed at your marginal rate, you'll want to try to time the sale in the year that your marginal tax rate will be reduced.

Make any sense??
TMF Taxes
Roy
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