A Mutual Fund Tax Problem And How To Avoid It

Contributing sentiments towards policy:

54% : This year, in a down market, you could wind up owing tax on putative appreciation.
53% : If you exit, you'll have $9 of capital appreciation on which to pay tax ($1 from selling the fund share, $8 from the gain distribution).
52% : At that point your fund share shrinks in value to $36, you have $4 in cash and you owe tax on the $4.
51% : The combination of a bear market, an exodus from actively managed funds and the peculiarities of fund distributions means that, even in a money-losing year, an investor can owe the IRS a wad of tax on long-term gains.
50% : A whipsaw for investors in the Columbia Integrated Large Cap Growth Fund: They've been slaughtered this year, down 22% so far, and now they are going to owe tax on a huge dollop of supposed capital appreciation amounting to 40% of their accounts.
49% : You'd have to pay tax on both the gain distribution and a gain on the fund share.
48% : You owe tax at the end of a bad year, but you are still ahead on the fund share and you also have that cash.
37% : If you stand pat, you'll owe tax on only $8 of gain -- but will face a future littered with more unwanted distributions.

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