Hold or sell: upcoming mutual fund capital gain distributions

[travel2020]

I have some non-Vanguard mutual funds purchased in a taxable account some years ago. I’ve consolidated/exited several funds already but held off on these due to the taxable gains. But looks like the funds will be doing significant short term and long term capital gains distributions this year (most of my purchases are over a year), so having second thoughts:

Here are some more details (these are Trow price funds so fees are high at 0.4%-0.7% range)

• Fund A: 14.5K lifetime gains, 2.7k short term distribution, 3.7k long term CPA gains distribution
• Fund B: 61k lifetime gains, 1.5k short term, 5.2k long term
• Fund C: 62k lifetime gains, 5.3k short term, 6k long term
• [Fund D: 25k lifetime gains, 1K short term, 4.9k long term
• Fund E: 58k lifetime gains, 3.8k short term, 6.2k long term

Estimated tax rate-LT gains: 15%
Estimated tax rate- ST gains: 22%

Based on this, it looks like I’d need to pay $33k in taxes if I sell all before the cap gains distribution. If I hold, the tax hit would be 7.1K just for this year but probably similar again next year so over time, I’d likely be paying a lot more in taxes and fees.

Are there other things to consider before making a decision on this? And when is it too late to decide on exiting the funds to avoid the cap gains distributions?

Thanks in advance.

[secondcor521]

And when is it too late to decide on exiting the funds to avoid the cap gains distributions?

Funds publish a record date for distributions, so in order to avoid receiving them and being taxed on them, you'd need to sell  before that record date.  The record date is usually a few days before the distributions happen, and you should be able to find that date on the funds' website.

[travel2020]

Funds publish a record date for distributions, so in order to avoid receiving them and being taxed on them, you'd need to sell  before that record date.  The record date is usually a few days before the distributions happen, and you should be able to find that date on the funds' website.

Thanks! The record dates are all between 12/7 and 12/15 so looks like if I sell by 12/1 or so, I should be able to avoid the distributions/taxes.

[boarder42]

And when is it too late to decide on exiting the funds to avoid the cap gains distributions?

Funds publish a record date for distributions, so in order to avoid receiving them and being taxed on them, you'd need to sell  before that record date.  The record date is usually a few days before the distributions happen, and you should be able to find that date on the funds' website.

what are these things? are these something i've never heard of b/c i only buy passive index funds?

[secondcor521]

And when is it too late to decide on exiting the funds to avoid the cap gains distributions?

Funds publish a record date for distributions, so in order to avoid receiving them and being taxed on them, you'd need to sell  before that record date.  The record date is usually a few days before the distributions happen, and you should be able to find that date on the funds' website.

what are these things? are these something i've never heard of b/c i only buy passive index funds?

You probably just haven't noticed.

Stock index funds still pay out dividends.  Bond index funds still pay out interest.  Some index funds, under some atypical circumstances, will pay out capital gains distributions.  In all such cases, there are record dates and distribution dates and reinvestment dates.  And in all such cases, those dates are typically published on the funds' websites.

Here, for example, is a document showing a bunch of record dates this year for a variety of Vanguard index funds:

https://advisors.vanguard.com/iwe/pdf/taxcenter/FADIVDAT_032021.pdf

[boarder42]

And when is it too late to decide on exiting the funds to avoid the cap gains distributions?

Funds publish a record date for distributions, so in order to avoid receiving them and being taxed on them, you'd need to sell  before that record date.  The record date is usually a few days before the distributions happen, and you should be able to find that date on the funds' website.

what are these things? are these something i've never heard of b/c i only buy passive index funds?

You probably just haven't noticed.

Stock index funds still pay out dividends.  Bond index funds still pay out interest.  Some index funds, under some atypical circumstances, will pay out capital gains distributions.  In all such cases, there are record dates and distribution dates and reinvestment dates.  And in all such cases, those dates are typically published on the funds' websites.

Here, for example, is a document showing a bunch of record dates this year for a variety of Vanguard index funds:

https://advisors.vanguard.com/iwe/pdf/taxcenter/FADIVDAT_032021.pdf

yeah i'm aware of dividends and i guess short term vs long term capital gains play a roll in if they're qualified or not?

[secondcor521]

And when is it too late to decide on exiting the funds to avoid the cap gains distributions?

Funds publish a record date for distributions, so in order to avoid receiving them and being taxed on them, you'd need to sell  before that record date.  The record date is usually a few days before the distributions happen, and you should be able to find that date on the funds' website.

what are these things? are these something i've never heard of b/c i only buy passive index funds?

You probably just haven't noticed.

Stock index funds still pay out dividends.  Bond index funds still pay out interest.  Some index funds, under some atypical circumstances, will pay out capital gains distributions.  In all such cases, there are record dates and distribution dates and reinvestment dates.  And in all such cases, those dates are typically published on the funds' websites.

Here, for example, is a document showing a bunch of record dates this year for a variety of Vanguard index funds:

https://advisors.vanguard.com/iwe/pdf/taxcenter/FADIVDAT_032021.pdf

yeah i'm aware of dividends and i guess short term vs long term capital gains play a roll in if they're qualified or not?

That's a different thing.  In order to be qualified, you have to hold the underlying MF for a certain period around the record date - I think it's about 60 days before and 60 days after.  And qualified or not only refers to dividends, not interest and not capital gains.  (There are a few other requirements, but that's the main one.)