Chapter 8: CRPC
Taxation of mutual fund distributions
Receive distributions as cash- pay taxes in year in which paid
Qualified dividends - ANS-Common stocks held by fund, require a holding period
LT Corp gains- Preferred tax treatment, 0, 15 or 20%
Taxation of mutual fund distributions
Capital gains - ANS-Only happen when sell stock
Appreciation of stock $10-20
Taxation of mutual fund distributions
Ordinary income - ANS-2019
MFJ -
0-19k 10%
19-79k 12%
79-168 22%
Taxation of MF sales - ANS-Which shares have been redeemed?
Are the shares short-term or long-term.
Taxable event - cash distributions or transfer to different fund
Cost Basis - ANS-Keep accurate records
Price +
# of shares purchased +
Costs associated with improvements (if residence) =
FIFO - ANS-first in first out, first purchased first sold
Less tax on any gains
IRS assumes if taxpayer fails to choose another method
Least advantageous for tax payer during a bulk market
average basis method - ANS-Total all shares purchased
$
—— = Avg.
#
, Avg. 15+10 25. = 12.5
——
2
Most common method,
MF cos are providing average cost basis info on all sale of shares
Share Identification - ANS-Method of calculating capital gains and losses by which the
investor identifies which shares were sold as opposed to using FIFO or average cost.
If in higher tax bracket, sell ones with lower tax basis. $5 vs $10
Most advantageous for investors because it allows for "manipulation" of gain or loss of a
sale.
Inherited assets
Step up cost basis - ANS-$1,000,000 FMV
100,000 Grandma's basis
Your basis is $1,000,000
Value at the date of death
Gifted assets
Carryover cost basis - ANS-Gift is the lesser of donors basis or asset on date of gift
Not as advantageous in some cases
$10 in 1999
FMV now $5
Take $5 basis
Cap gains and losses
Collctables, coins, gold, artwork, stamps - ANS-Taxed at 28%
Cap gains and losses
Net short term cap gains - ANS-Taxed as ordinary income
Cap gains and losses
Net long term cap gains
Broken down by income 0 -15% - ANS-MFJ EX
ordinary income 19,200
LTCG. 30,000
————-
49,200 taxable income
Taxation of mutual fund distributions
Receive distributions as cash- pay taxes in year in which paid
Qualified dividends - ANS-Common stocks held by fund, require a holding period
LT Corp gains- Preferred tax treatment, 0, 15 or 20%
Taxation of mutual fund distributions
Capital gains - ANS-Only happen when sell stock
Appreciation of stock $10-20
Taxation of mutual fund distributions
Ordinary income - ANS-2019
MFJ -
0-19k 10%
19-79k 12%
79-168 22%
Taxation of MF sales - ANS-Which shares have been redeemed?
Are the shares short-term or long-term.
Taxable event - cash distributions or transfer to different fund
Cost Basis - ANS-Keep accurate records
Price +
# of shares purchased +
Costs associated with improvements (if residence) =
FIFO - ANS-first in first out, first purchased first sold
Less tax on any gains
IRS assumes if taxpayer fails to choose another method
Least advantageous for tax payer during a bulk market
average basis method - ANS-Total all shares purchased
$
—— = Avg.
#
, Avg. 15+10 25. = 12.5
——
2
Most common method,
MF cos are providing average cost basis info on all sale of shares
Share Identification - ANS-Method of calculating capital gains and losses by which the
investor identifies which shares were sold as opposed to using FIFO or average cost.
If in higher tax bracket, sell ones with lower tax basis. $5 vs $10
Most advantageous for investors because it allows for "manipulation" of gain or loss of a
sale.
Inherited assets
Step up cost basis - ANS-$1,000,000 FMV
100,000 Grandma's basis
Your basis is $1,000,000
Value at the date of death
Gifted assets
Carryover cost basis - ANS-Gift is the lesser of donors basis or asset on date of gift
Not as advantageous in some cases
$10 in 1999
FMV now $5
Take $5 basis
Cap gains and losses
Collctables, coins, gold, artwork, stamps - ANS-Taxed at 28%
Cap gains and losses
Net short term cap gains - ANS-Taxed as ordinary income
Cap gains and losses
Net long term cap gains
Broken down by income 0 -15% - ANS-MFJ EX
ordinary income 19,200
LTCG. 30,000
————-
49,200 taxable income
