Mutual Fund Loss

[turbo74978]

Mutual Fund loss in value of $25K (from Jan to Nov) then we get a $16K capital gain payout in Dec --- and I get nailed on taxes for $16K capital gains!  Does this make sense?

[jtax]

Yes, it does. It is called "buying a dividend" (or in this case capital gain distribution). It is unfortunate, especially for capital gain distributions, which you may not have been able to anticipate (being irregular compared to dividends). Those distributions are gains the fund had from selling winners and had to distribute so you pay the tax and not the fund. Does seem like a lot, but it does happen.

The good news is capital gains have never been taxed at such low rates in history and might even be taxed at zero percent depending upon your income level. Also if you reinvested the distribution you have increased your basis in the shares and will have less of a gain when you eventually sell.

See e.g. https://investor.vanguard.com/investing/taxes/buying-dividend

[turbo74978]

Much thanks!