The Herald Bulletin

Afternoon Update

Local Business

June 15, 2013

'Big Joe' Clark: Taxed today and gone tomorrow


ABC fell from $40 to $35 and the manager sold the shares to raise some cash to take care of fleeing investors. The stock is less today than when you bought in but the fund bought the shares at $25 which means they have an internal gain. As an owner of the trust you get to recognize that gain on your tax return! Congrats.

This is important in volatile and questionable markets. It has happened before and it’s likely to happen again. Late in 1999 the market turned ugly and some investors sold producing capital gains inside of mutual funds. You get a tax bill due the next April. The problem is the tech wreck started in March of 2000 and you were now paying taxes on money you no longer had due to the market correction. That's a double whammy!

This is not written to tell you the market is collapsing and obviously has nothing to do with retirement or IRA accounts but you do need to know that volatility can lead to more than just excitement and frustration. Volatility creates taxation. Stick to your plan but also understand your exposure to both risk and taxation.

Joseph “Big Joe” Clark, whose column is published Sundays, is a certified financial planner. He can be reached at or 640-1524.

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