Mutual Fund Ratings

Do a hedge and mutual funds have to pay income and capital gains taxes on its investments?

TJS asked:


If the fund makes a trade does it have to pay the taxes or does the investor pay taxes after they make a withdrawl from the fund? Or is it both? Same with Mutual Funds? If these funds don’t have to pay taxes on their trades, this seems like a HUGE advantage compared to the average investor.

Tags: Capital Investments, Hedge Funds, Trades

This entry was posted on Saturday, January 10th, 2009 at 12:44 am and is filed under Investing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

4 Responses to “Do a hedge and mutual funds have to pay income and capital gains taxes on its investments?”

1. muncie birder says:

   January 12, 2009 at 4:53 pm

   the investors pay the taxes.
2. lb_centaur says:

   January 13, 2009 at 11:38 am

   Taxes are paid by shareholders
3. jeff410 says:

   January 15, 2009 at 2:09 am

   The capital gains are distributed to the investors proportionally and they have to pay taxes on tthem.
4. The Shadow says:

   January 15, 2009 at 2:45 pm

   Mutual funds are required to distribute substantially all of their gains to their shareholders. The gains are taxable to the shareholders in the year that they are distributed. In reality, the fund does not have an advantage. They’re not taxed on the gains, but they don’t get to keep them either.

   Mutual funds make their money from management fees and, for some, sales commissions. They don’t directly profit from capital gains.