|
|
|
Exchange Traded Funds Are Good for Investors
Exchange Traded Funds (ETFs) are growing. Investors are choosing low annual expense and market return over high annual expense and promised performance.
Total ETF inflow is growing faster than Mutual Fund inflow. ETF inflow grew from $42.5...
Online Trading: 7 Success Secrets
Getting ready to do some online trading? Get the facts on options and arbitrage trading before deciding on your trading technique. Join a live teleseminar at www.surefireonlinetradingsuccess.com. Here are some things to consider in preparing to...
Personal Finance 101
The subject of personal finance is very broad, but as a beginning, I would like to discuss what I consider the foundation of personal finance: security. Security Security to me means that I am prepared for the "hit by a bus" scenario. I have...
Return on Investment Guidelines
Return On Investment Guidelines By William Cate July 2004 [http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/] Investment reward should be a function of speculation...
Start Taking the Headaches out of Your Finances with this Do-It-Yourself Financial Plan
Actions You Take Today Assure Your Comfortable Future
It’s not really news but You’ll need money the rest of your
life. Hopefully you’ll have all you need. To get there you
need to think about how your actions today will influence
your...
|
|
| |
|
|
|
|
|
|
Avoiding Double Taxation
Many people who buy mutual funds and other stocks often end up paying tax twice when they finally sell the security. This is because they do not keep track of their "average cost base" per share. This problem is very prevalent on investments when the dividends have been reinvested in the same security. Most mutual fund investors reinvest their dividends in more shares of the same fund. Many large corporations offer dividend reinvestment programmes that allow the shareholder to acquire more shares of the corporation directly without any brokerage charges.
While reinvestment of dividends is usually an excellent idea, it does require some record keeping on your part to avoid double taxation. Many financial planning firms provide this tracking as part of their service. In my experience almost every case that I have looked at after a sale, has resulted in the reinvestment of dividends not being accounted for.
For example, let's say you bought units or shares in XYZ mutual fund in 1990 for $ 10,000 when the shares were $5 each. So you got 2000 shares. At the end of the year, the fund will declare a dividend equal to the total of its realized capital gains, dividend and interest income etc. less the fund's expenses. Let's say this dividend worked out to 30 cents per share. On 2000 shares that is a $600 dividend or 120 more shares if the unit value hasn't changed since you bought into the fund.
You will receive a T3 slip in March for that dividend whether you take cash or additional shares for it. If it is a mutual fund corporation you will receive a T5 slip for the dividend declared at its fiscal year end. The tax effect is the same. The point to understand here is that you will be paying taxes that year on that dividend whether you receive it or not. If you reinvest the dividend in more of the same shares, for tax purposes the "average cost per share" has now risen by 30 cents per share. Your total investment is now $10,600 (2120*5.00) from an income tax point of view because you will already have been taxed in the current year for the $600.
Now lets assume they pay the same
dividend on the same unit value in 1991, 1992, 1993 and then you sell your shares in XYZ mutual in 1994 and receive net proceeds of $14,000. Most people I have found would report a capital gain of $4,000 on their tax return and forget that they already paid tax on four annual dividends. The capital gain is actually $1,600 ($14,000 - $10,000 + 4 x $600), less than half of what is often reported. The good news is that if this has happened to you, you can apply to have an adjustment for at least the last three years of tax returns and sometimes further back than that.
As you may sell a portion of your shares instead of the entire position, it is necessary to keep track of these matters on a price per share basis, rather than the total investment. By adding the dividend per share to the previous cost per share, you now have the new cost per share for future redemptions. This calculation is especially helpful if you are taking a regular monthly income from a mutual fund-often referred to as systematic withdrawal plans. As there are often twelve redemptions per year, a simple record is necessary to come up with the taxable portion for tax time.
If you don not keep track of your cost per share you will be paying more tax than necessary. If you have other losses to offset your gains, you will be using up your losses needlessly. All of these are forms of double taxation, which result from not keeping track of reinvested dividends. If you want a form for keeping track of your cost base there is a free Form for tracking ACB, which you can download, form our web site at www.money-software.com
Copyright 2004 – www.money-software.com
About the Author
Peter F. Baigent CFP, CLU, CHFC, RFP. is a Past President of the Canadian Association of Financial Planners for British Columbia, a former Director of the Canadian Association of Financial Planners. He has spoken across Canada on financial planning matters and has taught courses for the Chartered Financial Consultants & Certified Financial Planners degrees. He is the founder of Money Minders Software which produces financial planning software.
|
|
|
|
|
| Morningstar: Stocks, Mutual Funds, and Investing |
| Offers investment research. Covers stocks, funds and college savings plans. |
| www.morningstar.com |
|
| StockSmart - Putting the Individual Investor Ahead |
| StockSmart putting individual investors ahead with research that allows individuals to easily compare industry competitors. Take stock quotes to the next ... |
| www.stocksmart.com |
|
| Finance - Stocks-Mutual-Funds Ezine Articles |
| EzineArticles.com allows ezine or email list publishers to upload or download free expert content that can be used within email newsletters or websites. |
| ezinearticles.com |
|
| Finance: Stocks Mutual Funds Articles from EzineArticles.com |
| http://ezinearticles.com/?cat=Finance:Stocks-Mutual-Funds Free Content For Your Ezine or Website http://creativecommons.org/licenses/by-nc-nd/2.0/ Having a ... |
| ezinearticles.com |
|
| NewsIsFree: USATODAY.com: Stocks/Mutual Funds: Information About ... |
| USATODAY.com: Stocks/Mutual Funds · Original XML Source Money Classifieds - Stocks/Mutual Funds Copyright 2011, USATODAY.com, USA TODAY ... |
| www.newsisfree.com |
|
| Online Giving - Campus Crusade for Christ International |
| Credit Card by Mail or Phone. Other Ways to Give. Non-Cash Gifts: Stocks, Mutual Funds, & Property Gifts · Planned Giving: Wills, Trusts & Annuities ... |
| https: |
|
| New way to watch stocks, mutual funds & 401k at office. Free ... |
| Excel workbook for stocks and mutual funds. Download quotes directly from Internet. |
| www.esquotes.com |
|
| News From The Associated Press |
| Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Comments and questions. |
| customwire.ap.org |
|
| Google Finance Launches : Track Stocks, Mutual Funds & Companies |
| Google Finance offers an easier way to search for stocks, mutual funds, public and private companies. Further, Google Finance also offers a broad range of ... |
| www.quickonlinetips.com |
|
| Yahoo! Answers - Individual stocks, mutual funds, and ETFs? |
| 2 answers - what are the difference between individual stocks , mutual funds and ETFs? which one is better for investment ? |
| answers.yahoo.com |
|
| Petition Spot :: View Forum - Investing: Stocks, Mutual Funds |
| Investing: Stocks, Mutual Funds Moderators: None Users browsing this forum: None, Goto page. Post new topic · Petition Spot Forum Index->Investing: Stocks, ... |
| www.petitionspot.com |
|
| Donate Stocks/Mutual Funds/Bonds: Beth Israel Deaconess Medical ... |
| Subordinate Link Selected Link (Level 3): Donate Stocks/Mutual Funds/Bonds · Subordinate Link Donate by Telephone · Subordinate Link Employee Giving ... |
| www.bidmc.harvard.edu |
|
| Gifts of Stocks/Mutual Funds/Bonds: Beth Israel Deaconess Medical ... |
| Subordinate Link Selected Link (Level 3): Gifts of Stocks/Mutual Funds/Bonds · Subordinate Link Donate By Telephone or Mail ... |
| www.bidmc.harvard.edu |
|
| U.S. stocks - mutual funds that invest in American companies ... |
| US stocks - mutual funds that invest in American companies from Kiplingers Personal Finance Magazine in Business & Finance provided free by LookSmart Find ... |
| www.findarticles.com |
|
| Investment capsule: - stocks, mutual funds and fixed income Money ... |
| Investment capsule: - stocks, mutual funds and fixed income from Money Digest in Business & Finance provided free by LookSmart Find Articles. |
| www.findarticles.com |
|
| stocks mutual funds invest free stock quotes stock picks investing ... |
| Free short term stock picks. Buy, sell and hold recommendations. Stock market, financial investments, quotes, mutual funds. |
| home.flash.net |
|
| Stocks/Mutual Funds - Gospel for Asia |
| 14500 native missionaries already serve and plant over 10 churches daily. Help sponsor a native missionary for $30 per month. 100% goes directly to the ... |
| www.gfa.org |
|
| Keeping Good Records: Stocks, Mutual Funds, and Bond Investing |
| Keeping Good Records: Stocks, Mutual Funds, and Bond Investing. |
| taxes.about.com |
|
| Online Trading at Fidelity- Stocks, mutual funds, ETFs, options ... |
| With Fidelity online trading, you get low commissions, trading tools, and a range of investment options. |
| https: |
|
| Articles for Reprint - Stocks-Mutual-Funds |
| Stocks-Mutual-Funds. Personal-Finance · Currency-Trading ... By Sachin A | On June 1, 2006 | In Stocks-Mutual-Funds | Rated. Full Article · Print Article ... |
| www.articles-hub.com |
|
|