Mutual Fund tax question thanks for the help?

If I buy shares of a mutual fund at $10 or whatever on Jan 1, and the value is up to $12 at the end of the year, I know I have to pay capital gains tax right? But do I also have to pay tax when I make a withdrawl from my mututal fund. Say the day after I pay my capital gains tax for the amount it increased in value I take out $20,000 from the mutual fund, I have to pay tax on that too? Thanks for the help

Oh okay thanks RIck, but in that case can you explain to me how just investing in mutual funds is any different than a Roth IRA? I thought that was the only way it was tax free. Thanks again for the answer, that makes sense I guess. I couldn't see paying it twice.

So if my total value is 100,000 in mututal funds and I want to take 20,000 out I just pay tax on the difference in share value for that 20,000 right?

Thanks again and have a good night

Mutual funds are required by law to make annual capital gain and dividend distributions based on earnings - normally these distributions are reinvested in additional shares. After the end of the year, the mutual fund house will send you a 1099 form listing these. Those become taxable items unless the fund is held within a retirement account.

You do not have to "pay tax" because or when you sell shares and you are not being "taxed twice." See www.mfea.com for more info on how mutual funds work.

You do not pay capital gains tax unless you sold some of it. You don't pay tax on unrealized gains.

You pay taxes when you take the money out (well, that year anyway).

Capital gains are distributed by the fund every year on the stocks they have sold for a profit. And you have to pay taxes on that.

And, if you buy shares at an average cost of $10 per share and the NAV goes to $12 when you sell it, you owe taxes on that $2 gain.

The mutual company buys and sells shares of stocks throughout the year and the holders of that MF do in fact have to pay cap gains tax on the net of all investment activity within the fund at the end of the year even though you actually have not realized or sold any shares. Also you will have to pay capital gains on the net gain of your investment in the fund once you sell. The fund company or broker/dealer will send you 1099 which will provide you with the amounts you will have to pay short and long term cap. gains on.

I hope this helps, oh and I am not an investment professional so dont quote me. Thanks and good luck!