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Posted by Barry Margolin on November 11, 2006, 11:00 am
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> 3. I understand short/long term capital gains. Suppose that
> I don't do a trade, but that I'm a buy/hold investor. You
> mean to tell me that every year, the
> dividends/earnings/interest would get taxed at the long term
> rates or as earning? This implies that i'd have to sell
> some securities to pay off the taxes.
No you don't. You receive a check for $100 dividend, you put
$30 asid to pay the tax on that dividend, and you do what you
like with the other $70. You only have to sell off securities
if you automatically reinvested the dividend, and you don't
have any other source of cash to pay your taxes with. If
you're so short on cash, it might be more advantageous to take
some of your dividends in cash rather than reinvesting them --
this becomes more of a financial planning issue than just a
tax issue.
--
Barry Margolin, barmar@alum.mit.edu
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***
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