Re: Partially re-invested distributions
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Posted by Mark on September 28, 1999 at 21:58:27:
In Reply to: Partially re-invested distributions posted by Sam C. on September 28, 1999 at 20:52:52:
: Hello,
: I own a few Vanguard index funds which assess a $2.50/quarter fee
: for accounts <$10,000. The fee is deducted from quarterly
: distributions. Since I reinvest the balance (distribution - fee),
: how should I record this using FM? : The account fee option under the "Distribution" menu seems to
: indicate you are paying the fee via redeeming shares which I am not
: doing. : Thanks in advance,
: Sam C. Hi Sam,
To be strictly correct you could record this with 3 distributions. 1) A reinvested distribution for the (dist - fee) amount
2) A distributed distribution for the amount of the fee
3) An account fee "distributed" distribution for the amount of the fee.
This account fee is the type for paying the fee out of pocket, or
a negative "distributed" distribution. There are other ways you could record it also. You could
record it as 2 distributions and a purchase: 1) A distributed distribution for the amount of the original distribution
2) A purchase for the number of shares you repurchased with (dist - fee)
3) The same account fee as above. Another option, which is not strictly correct as far as tax liability goes,
is to just record a single reinvested distribution for the (dist - fee)
amount. This puts more of the tax liability in capital gains, rather
than distributions though. An account fee will increase your
cost basis, lowering your capital gains. If you use this last method
you will be paying less for taxes on your distributions (by $2.50/quarter),
but you will be paying the same amount more on your capital gains taxes
whenever those are realized. You should consult your tax advisor on the
legality of this, if you choose the 3rd method. Thanks,
Mark
--
Mark Beiley
Fund Manager for Windows 3.1x/95/98/NT
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