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Capital Gains Treatment

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Capital Gains Treatment
Describes lump-sum distributions of qualified plan balances that accrued before 1974 may be eligible for capital gains treatment.

Notes:
Capital gains distributions typically occur near the end of the calendar year and are taxable to the shareholder of the investment company.

This poses a problem for some mutual fund investors who purchase new mutual funds near the end of a calendar year. Because they receive a capital gains distribution, they immediately receive taxable income and face a mutual fund NAV is reduced from the distribution.


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The possibility of capital gains treatment for the appreciation of the value of the producer's ownership interest in the reinsurance company is critical to creating the maximum amount of after-tax wealth.
This decision is a potentially devastating blow to capital gains treatment because it suggests litigation proceeds can never be capital in nature.
For example, using an S corporation or partnership (including a limited liability company (LLC)) instead of a C corporation allows gains associated with intangible assets (such as goodwill) to receive long-term capital gains treatment at the individual-owner level.
 
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