You receive a taxable gain statement at the end of the year, but you didn’t sell any investments. How can this be?
Typically, mutual funds buy and sell stocks or bonds throughout the year. Each time the fund sells an investment, its owners owe tax on their share of any gain. At the end of each year, the mutual fund company reports the total gains to its owners for income tax reporting purposes.
Many investors are surprised to learn they owe tax when they didn’t receive any cash from the company. Instead of distributing the proceeds to you when an investment is sold, the fund manager reinvests the cash in another investment. However, you are still responsible for the tax.
Have questions about your investment portfolio? Our team is happy to help. Reach out and schedule time with one of our tax professionals here: https://www.bas-pc.com/appointment-center