Grrr...unexpected capital gain distribution

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RenoJay
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Grrr...unexpected capital gain distribution

Post by RenoJay »

Early this year I decided I no longer wanted any automatic reinvestment of capital gains or dividends in my taxable accounts. I went through the Vanguard screens and thought I had checked all the correct boxes to have these pay outs put into a money market fund. Lo and behold...I just discovered an automatically reinvested $9,000 capital gain from my equity income fund. I called Vanguard, and it sounds like I may not have noticed a separate drop down for cap gains (distinct from dividends.) I'm pretty ticked.

My other funds are Total Stock Market Admiral and Total International Admiral. I double checked to reinvestment preferences with a Vanguard rep, but can anyone tell me how to know which funds have large undistributed cap gains that they're sitting on?
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Doc
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Re: Grrr...unexpected capital gain distribution

Post by Doc »

RenoJay wrote:but can anyone tell me how to know which funds have large undistributed cap gains that they're sitting on?
Morningstar, for example:
Potential Cap Gains Exposure
VTSAX 31.58
http://performance.morningstar.com/fund ... ture=en-US

Go to M* and look up the fund then click on "Tax"
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dbr
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Re: Grrr...unexpected capital gain distribution

Post by dbr »

On the distribution tab they show unrealized appreciation (scroll down):

https://personal.vanguard.com/us/funds/ ... =INT#tab=4
pshonore
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Re: Grrr...unexpected capital gain distribution

Post by pshonore »

Putting them into an MM fund doesn't change the tax due (except for the a small amt of CG distributions on those CG distributions next year.
rkhusky
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Re: Grrr...unexpected capital gain distribution

Post by rkhusky »

Can't you just sell an amount equal to the cap gain? Are you worried about a wash sale?
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RenoJay
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Re: Grrr...unexpected capital gain distribution

Post by RenoJay »

pshonore wrote:Putting them into an MM fund doesn't change the tax due (except for the a small amt of CG distributions on those CG distributions next year.
Yes, I'm aware of that but the goal is to lessen my equity exposure so I hate the fact that this was automatically reinvested into a fund in which I'd rather be divesting.
sscritic
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Re: Grrr...unexpected capital gain distribution

Post by sscritic »

RenoJay wrote:Early this year I decided I no longer wanted any automatic reinvestment of capital gains or dividends in my taxable accounts. I went through the Vanguard screens and thought I had checked all the correct boxes to have these pay outs put into a money market fund. Lo and behold...I just discovered an automatically reinvested $9,000 capital gain from my equity income fund. I called Vanguard, and it sounds like I may not have noticed a separate drop down for cap gains (distinct from dividends.) I'm pretty ticked.
I hope you are ticked at yourself.

I am looking at the page titled "Change your dividends and capital gains elections"; Dividends and capital gains are in separate columns.

Code: Select all

Dividends	Capital gains
 Reinvest	  Reinvest
When I click on change elections, I see two drop downs, one for dividends and one for capital gains.

Code: Select all

Dividends	
Capital gains	
Each drop down contains four choices. The drop down boxes and the choices are hard to miss.
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frugaltype
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Re: Grrr...unexpected capital gain distribution

Post by frugaltype »

sscritic wrote: Each drop down contains four choices. The drop down boxes and the choices are hard to miss.
Everything is obvious, except when it isn't.
livesoft
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Re: Grrr...unexpected capital gain distribution

Post by livesoft »

Just use specific ID and sell the shares that were automatically reinvested.

If they have a loss, that's tax-loss harvesting :)
If they have a gain, that's better than they would've done in your checking or mm account.
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bottlecap
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Re: Grrr...unexpected capital gain distribution

Post by bottlecap »

I also am not a big fan of having to choose two reinvest options, although I haven't forgotten to make sure both reinvest options are checked (I almost forgot once, though). I'm not sure who would choose to reinvest dividends one way and capital gains another, but I presume there is some reason for separation them.

JT
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RenoJay
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Re: Grrr...unexpected capital gain distribution

Post by RenoJay »

livesoft wrote:Just use specific ID and sell the shares that were automatically reinvested.

If they have a loss, that's tax-loss harvesting :)
If they have a gain, that's better than they would've done in your checking or mm account.
Livesoft: This is an interesting tip, although if I've previously chosen a different method for selling in this fund, am I able to choose specific ID now and then go back to whatever I was using previously?
sscritic
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Re: Grrr...unexpected capital gain distribution

Post by sscritic »

bottlecap wrote: I'm not sure who would choose to reinvest dividends one way and capital gains another, but I presume there is some reason for separation them.
You own a stock. You want to spend the dividends, but you don't want to sell any stock. You have the dividends sent to you.

You own a mutual fund. You want to spend the dividends, but you don't want to sell any stock. You have the dividends sent to you, but you have the capital gains reinvested. Why? Because the capital gains came from the fund selling some shares it held, not from you selling any of your fund shares.

[Technically, this is not reinvesting dividends one way and capital gains another (whatever another reinvesting means as opposed to the first reinvesting), but it is sending dividends in one direction and capital gains in another.]
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bottlecap
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Re: Grrr...unexpected capital gain distribution

Post by bottlecap »

sscritic wrote:
bottlecap wrote: I'm not sure who would choose to reinvest dividends one way and capital gains another, but I presume there is some reason for separation them.
You own a stock. You want to spend the dividends, but you don't want to sell any stock. You have the dividends sent to you.

You own a mutual fund. You want to spend the dividends, but you don't want to sell any stock. You have the dividends sent to you, but you have the capital gains reinvested. Why? Because the capital gains came from the fund selling some shares it held, not from you selling any of your fund shares.

[Technically, this is not reinvesting dividends one way and capital gains another (whatever another reinvesting means as opposed to the first reinvesting), but it is sending dividends in one direction and capital gains in another.]
Oh, okay. I'm not old enough to have to worry about this.

JT
livesoft
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Re: Grrr...unexpected capital gain distribution

Post by livesoft »

RenoJay wrote:Livesoft: This is an interesting tip, although if I've previously chosen a different method for selling in this fund, am I able to choose specific ID now and then go back to whatever I was using previously?
Sorry, but I don't know the answer to that.
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Doc
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Re: Grrr...unexpected capital gain distribution

Post by Doc »

RenoJay wrote:
livesoft wrote:Just use specific ID and sell the shares that were automatically reinvested.

If they have a loss, that's tax-loss harvesting :)
If they have a gain, that's better than they would've done in your checking or mm account.
Livesoft: This is an interesting tip, although if I've previously chosen a different method for selling in this fund, am I able to choose specific ID now and then go back to whatever I was using previously?

Be very very careful here. Not only may you create a wash sale that negates your loss but there is also an obscure 61 day holding requirement that may make any ordinary dividends non qualified.
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sscritic
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Re: Grrr...unexpected capital gain distribution

Post by sscritic »

As I read the OP, he shut off dividend reinvestment. The new shares were purchased from the capital gains distribution after the dividend reinvestment was shut off. The dividends he received were from the old shares. If he sells the new shares today, he will never get any dividends from the new shares. If he never gets any dividends, then the dividends he doesn't get are neither qualified nor not qualified.
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Doc
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Re: Grrr...unexpected capital gain distribution

Post by Doc »

sscritic wrote:As I read the OP, he shut off dividend reinvestment. The new shares were purchased from the capital gains distribution after the dividend reinvestment was shut off. The dividends he received were from the old shares. If he sells the new shares today, he will never get any dividends from the new shares. If he never gets any dividends, then the dividends he doesn't get are neither qualified nor not qualified.
You are likely correct or the OP. I used "may" to cover other situations which may not be exactly the same as the OP;s.
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livesoft
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Re: Grrr...unexpected capital gain distribution

Post by livesoft »

Doc wrote:
RenoJay wrote:
livesoft wrote:Just use specific ID and sell the shares that were automatically reinvested.

If they have a loss, that's tax-loss harvesting :)
If they have a gain, that's better than they would've done in your checking or mm account.
Livesoft: This is an interesting tip, although if I've previously chosen a different method for selling in this fund, am I able to choose specific ID now and then go back to whatever I was using previously?

Be very very careful here. Not only may you create a wash sale that negates your loss but there is also an obscure 61 day holding requirement that may make any ordinary dividends non qualified.
Since the distribution was just paid, I am sure the 61-day holding requirement will not apply to these just-purchased shares. Also, a wash-sale is unlikely since there would be no "replacement shares". That is, even if one sold these just-purchased shares at a loss, there would be no wash sale.
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scrabbler1
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Re: Grrr...unexpected capital gain distribution

Post by scrabbler1 »

sscritic wrote:
bottlecap wrote: I'm not sure who would choose to reinvest dividends one way and capital gains another, but I presume there is some reason for separation them.
You own a stock. You want to spend the dividends, but you don't want to sell any stock. You have the dividends sent to you.

You own a mutual fund. You want to spend the dividends, but you don't want to sell any stock. You have the dividends sent to you, but you have the capital gains reinvested. Why? Because the capital gains came from the fund selling some shares it held, not from you selling any of your fund shares.

[Technically, this is not reinvesting dividends one way and capital gains another (whatever another reinvesting means as opposed to the first reinvesting), but it is sending dividends in one direction and capital gains in another.]
I have this split option in a bond fund I own. I take as cash the fund's fairly steady monthly dividends (I am an early retiree who uses this income to cover my expenses) while I reinvest the fund's more erratic and less frequent (twice a year tops) cap gains distributions to boost the number of shares I own in the fund. This is a very effective option for my purpose.
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