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I have some shares in a unit investment trust which invests in municipal bonds. In 2000 one of the bonds matured, and the trust distributed the proceeds. I received a 1099.
I don't know the basis. Tentatively I am expecting to declare it as equal to the proceeds, since the bond matured at par. I know my total basis for the shares, but still own the same 5 shares that I did last year.
Any better ideas? The amount involved is $65, so it is not a big deal.
Thanks, Chris
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Some municipal UITs now provide a CG statement at the end of the year.

In the absence of one, I would do as you suggest, reporting CG=$0 until the last distribution of the UIT, at which time you'll recognize all of the gain or loss.

Ira
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Some municipal UITs now provide a CG statement at the end of the year.

In the absence of one, I would do as you suggest, reporting CG=$0 until the last distribution of the UIT, at which time you'll recognize all of the gain or loss.


Doesn't this reduce the basis in the UIT by the amount received? (I find UIT's confusing, and am yet to find a very clear explanation of how things work.)

TMF ExRO
Phil Marti
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I would expect that yes, counting the basis as equal to the sum on the 1099, which the return of principal, would reduce the remaining basis in the investment.
One would figure return of principal on a mortgage one owns as an investment similarly.
After the distribution the price of the units dropped by that amount.
I don't know whether the UIT originally bought the bond in question at par, a discount, or a premium. They didn't tell me. The final maturity of the trust isn't until 2007. Seems more sensible to me to declare zero capital gain and reduce my basis than to say zero basis and get a bunch of tax back in 2008.
Thanks for the thoughts! Chris
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In the absence of one, I would do as you suggest, reporting CG=$0 until the last distribution of the UIT, at which time you'll recognize all of the gain or loss.

Doesn't this reduce the basis in the UIT by the amount received? (I find UIT's confusing, and am yet to find a very clear explanation of how things work.)


I should have been clearer. That's exactly what I meant...treat the cash purely as a return of principal. This reduces the basis. When the basis reaches $0, any additional distributions become capital gains.

Ira
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