Format for quarterly investment review

[kv968]

You can look up a fund on Morningstar, hit the "tax" tab and it'll show you what percentage it paid in taxes over the years.

As a rule of thumb...most bond funds, REITS and funds with a high turnover rate often have the higher taxes associated with them.

[jIM_Ohio]

If selling with short term gains (< year), those will be taxed at the normal tax rate. Long term gains (> year) are taxed at 15% maximum or possibly less depending on income. The 15% capital gains tax is the one coming due in 2010 and most likely will be abolished.

The selling of a holding and waiting 31 days is a wash sale. With that you sell a LOSING stock and take the deduction on that loss while buying the stock back in 31 days if you want to continue to hold it. Doing so with a stock that made money will only realize that gain and won't help with taxes.

wait 32 days then
I am reading about this strategy on other forums
sell all taxable holdings
0% tax on all long term
then buy again a day after wash sale rules phase out

In case of zetta, she could "re-examine" her holdings and sell all, then buy different to fit allocation.

Her taxable holdings do not match her desired allocation.

[jIM_Ohio]

How do you determine how tax-efficient a fund is?

I don't own a commodities fund or a REIT yet, but am interested in adding a 5% stake in each because in theory they will have low correlation with stocks and bonds.

My current mutual funds already provide the 10% in bonds, so I don't think I need to buy a bond fund at this point.

I look at two factors
1) dividends paid out
2) portfolio turnover

Those two factors will trigger 90% of most taxable events. In case of PRPFX, it is committed to holding 25% in gold and 5% in silver, so 30% of the porfolio will not change unless assets drop, and make up of porfolio keeps those drops to a minimum.

Here is a yahoo link to PRPFX
PRPFX: Summary for PERMANENT PT- Yahoo! Finance

Here is link to profile page of same
PRPFX: Profile for PERMANENT PT - Yahoo! Finance

on this page I look at three numbers
FUND OPERATIONS Last Dividend (9-Dec-09): 0.28Last Cap Gain (3-Dec-08): 0.04Annual Holdings Turnover 37.00%

38.67 is the current share price, so the payouts are
yield is .7% of NAV
capital gain is .1% of NAV

It should be noted the manager tries to negate sales on turnovers (by using losses to offset gains). If you checked its history, I do not think it pays a gain very often.

It holds bonds, so I am "guessing" most of the dividends are from interest paid by bonds.

[MonkeyMama]

To jump into the tax fray - the capital gain rate is not 0% in 2010. It has been 0% for a few years, for people in the lower tax brackets. No doubt - zetta is not eligible - particularly if she sells a bunch of stocks, which will increase her taxable income. (I know from other postings, her income is quite high).

Selling the stocks for the 15% long term capital gains rate may be wise. BUT, zetta also has to worry about AMT. So basically, when it comes down to it, there really doesn't seem a lot to be gained with this strategy. With AMT, effective rate of the capital gains could be 22%-ish. I would at least start with that figure before you start deciding if it is worth selling this year.

Zetta - with so many assets - I highly advise talking with a tax professional. I've said before -usually tax and investment professionals are mutually exclusive. It is rare to find someone who can give good advice in both arenas - thought they are both very inter-related. BUT, I think talking with a tax professional would be far more to you benefit than trying to work out tax strategies on a forum like this. The tax laws in this arena are extremely complex. (Most specifically - adding AMT to the mix). I have no problem doling out simple tax advice to the average poster, but you really need some more in depth tax strategy considering the whole of your situation. For a lot of my clients, we discuss things with their investment advisor, to make sure we are all on the same page. Really, that may be best for you. (Of course, good luck finding a tax professional between now and 12/31. Just don't do anything rash!)

[zetta]

0% capital gains tax definitely falls under the "if it sounds too good to be true..." rule of thumb. When I rebalance my accounts it will be slow and steady...

[kv968]

wait 32 days then
I am reading about this strategy on other forums
sell all taxable holdings
0% tax on all long term
then buy again a day after wash sale rules phase out

You would only get the 0% tax on long term if you were in the lowest tax brackets (<15%). Otherwise you would pay 15% on long term and short term would be taxed at your ordinary income rate. The wash sale rules apply when you sell a LOSING stock, recognize the losses and then buy the same stock back after 30 days. Granted you could probably do what you're saying with 0% tax, but only if you're in the 10-15% tax bracket.

[jIM_Ohio]

You would only get the 0% tax on long term if you were in the lowest tax brackets (<15%). Otherwise you would pay 15% on long term and short term would be taxed at your ordinary income rate. The wash sale rules apply when you sell a LOSING stock, recognize the losses and then buy the same stock back after 30 days. Granted you could probably do what you're saying with 0% tax, but only if you're in the 10-15% tax bracket.

Thank you for details on the limits... zetta has a 2 year window where she is eligible for a Roth, that might suggest she is dropping to 25% bracket, or possibly to 15% bracket. If she is dropping to 15% bracket, this appears to be a strategy to look into.