Mutual funds may face problems unless they defer all post-October capital losses

Article Abstract:

Regulated investment companies have the option of deferring capital losses attributable to the portion of the tax year following October 31, but administrators should be aware that partial deferral can result in entity-level taxation of undistributed gains. The partial election can limit what may be designated capital gains dividends. Tax is due on the difference between the excess of long-term capital gains over net short-term capital losses and the maximum amount of dividends that may be designated.

Planning, Capital gains tax, Tax elections

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Service makes it easier to tax options on stock indices as section 1256 contracts

Article Abstract:

The scope of financial instruments treated as nonequity options under IRC section 1256 has been expanded to include stock index options. Mutual funds holding stock index options should be more aware of the potential for differing tax treatment as well as the risk of affecting regulated investment company status. Section 1256 contracts are deemed sold for fair market value at the end of a given tax year, and deemed gain or loss is recognized for that tax year.

Options (Finance), Recognition of gain or loss (Taxation), Recognized gain or loss (Taxation), Stock index options

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Mutual funds can use stock redemptions to meet distribution requirements

Article Abstract:

Mutual funds can use the technique of equalization debits to raise their tax deductions for dividends paid. The funds must qualify as regulated investment companies. The debits come from part of a distribution to surrendering shareholders which is a deemed dividend. There are alternative methods for computation of deemed dividends.

Analysis, Dividends, Tax deductions

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