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Effect on Unrealized CG in Mutual Fund after a LTCG distribution on 1099

So one of my MFs kicked out a rather substantial LTCG this year, resulting of course in quite a jump in my taxable income. Yes that's sort of a good news/bad news event, but my question is "what happens to the unrealized gain figure on the remaining amount in the fund ? Does it go down because of the payout, or stay the same ?

Tried wading thru my month-end and year-end statements, but could not get a clear picture of what effect the payout had on remaining unrealized gains.

It also just occurred to me, what if any effect on cost basis ?

Thanks for any guidance.

Reply to
Retired
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In a perfect system, any distribution from an investment should lower the market value of that investment by the amount of the distribution.In other words, if you fund distributed $1/share, the NAV of the fund would drop by $1. None of this has any impact on your cost basis *unless* the distribution is deemed a return of capital, in which case the distribution wouldn't be currently taxable.

If you want to see the effect of the large CG distribution, you need to look at the NAV on the day before and the day after the distribution. You should see a significant drop in the value.

Ira Smilovitz, EA Leonia, NJ

Reply to
ira smilovitz

According to snipped-for-privacy@serv3.dca.giganews.com, snipped-for-privacy@serv3.dca.giganews.com, snipped-for-privacy@serv3.dca.giganews.com snipped-for-privacy@serv3.dca.giganews.com>:

Mututal funds distribute capital gains in cash. Depending on how you have your account set up, they might send you a check or they might reinvest it in new shares.

If you get the cash, the cost basis doesn't change. If you reinvest, you've bought new shares so the reinvested amount is added to the basis.

When they distribute the gain, the NAV of each share of the fund goes down by the amount they distributed, so you have the same amount, just some in the fund and some in cash (which might then be reinvested in new shares.)

Reply to
John Levine

Unrealized gains are unrealized so they remain that way. Realized gains are what are paid out to you.

Unrealized gains become realized gains only when the holdings are sold.

Reply to
Leo Isenteze

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