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Willin'
06-14-2016, 07:14 PM
Here's one for the investing gurus here.

I have a couple of investments in tax free muni funds. I understand that the earnings are tax free, but lately there has been a surprising uptick in share price for both funds. Can anyone tell me if I were to sell these investments for a profit, would there be tax on the capital gains?

They are...

PRINX and
PRFHX

TIA!

peb
06-14-2016, 07:30 PM
If one sells a municipal bond that has appreciated, capital gain taxes are paid. Only interest is tax free.



So when a mutual fund sells an asset, the capital gains are then passed through to you via a 1099 form. IIRC , at that point, your cost basis in the fund is then incremented by that amount.



When you sell it, you pay any residual capital gain.



I think that is right. Norman would likely know for sure.

Vince Brennan
06-14-2016, 08:09 PM
Well done, Peb.Y>

Willin'
06-14-2016, 08:24 PM
Gracias, Amigo!

Todd D
06-14-2016, 08:42 PM
Depending on your income the cap gains rate may be as low as 0%.

Chip-skiff
06-14-2016, 09:33 PM
TIA? Are the bonds in a retirement account or a Roth IRA?

Willin'
06-14-2016, 09:44 PM
Neither, Chip. It wouldn't make sense to hold tax free munis in a ROTH, would it? I'd go for the highest total gains I could find to put in my ROTH IRAs.