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Author: Junglecat6 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121114  
Subject: UTMA for Kids and Tax Costs? Date: 4/16/1999 7:10 AM
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My three kids have UTMA's in a mutual fund with Fidelity Destiny II. I was pleased with this arrangement until tax time this year. My tax bill total for all three was just shy of $1,000 due to large year-end capital gains distributions.

Really do not want want to pay this kind of tax bill early. Any recommendations on how to alleviate this? Can the funds be moved into some non-taxable fund?
Suggestions for better programs (for college savings) would be appreciated.

Thanks.
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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: 14933 of 121114
Subject: Re: UTMA for Kids and Tax Costs? Date: 4/20/1999 7:02 PM
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[[My three kids have UTMA's in a mutual fund with Fidelity Destiny II. I was
pleased with this arrangement until tax time this year. My tax bill total for all three
was just shy of $1,000 due to large year-end capital gains distributions.

Really do not want want to pay this kind of tax bill early. Any recommendations
on how to alleviate this?]]

The best recommondation that I can make is to get out of these crummy mutual funds and invest in stocks themselved. You'll only recognize a taxable gain when YOU decide to sell the shares...not when the mutual fund decides to "pass through" income to you. Something that you might want to consider. But that will cause you to sell your current fund holdings, which may generate even more taxes. So it's a decision that you'll not want to take lightly.

There are also some "tax advantaged" mutual funds that keep their trading (and therefore their distributions) to a minimum. But you'll still have to sell your existing holdings to move them to a new fund.

[[ Can the funds be moved into some non-taxable fund?
Suggestions for better programs (for college savings) would be appreciated.]]

I'm not sure that you want to swallow the 6% return on a tax free mutual fund. Again...stocks will provide you with BOTH a long term return and the ability to control your finances. Don't let the tax tail wag the dog here.

Just my $.02
TMF Taxes
Roy

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