Computing shareholder advantage where RIC retains income

Article Abstract:

Calculation of the costs of income retention and income distribution to regulated investment company (RIC) shareholders demonstrates that the tax rates faced by the shareholders could be considered in deciding whether to retain ordinary portions of the required distribution. RICs that fail to distribute the required level of RIC income are subject to a four percent excise tax under IRC section 4982(a). The RIC may wish to weigh the cost of the excise tax against the costs that shareholders would incur in having gain from the RIC distribution subject to income taxation.

Laws, regulations and rules, Dividends, Excise taxes, Excise tax

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Master/feeder structures, foreign tax credit preferred stock

Article Abstract:

Two alternative arrangements for mutual funds are tax credit preferred stocks (TCPs) and master/feeder structures (MFSs). Both master and feeder funds in an MFS must qualify as regulated investment companies. Asset management in an MFS occurs in the master fund while sales occur in the feeder fund. TCPs function for foreign stocks and enjoy better tax benefits with Irish stocks than with United Kingdom stocks.

Analysis, Foreign tax credit, Preferred stocks

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Qualifying business units can save taxes and trouble for single country funds

Article Abstract:

US mutual funds which meet the criteria for qualified business unit may be able to use the host country's currency in profit and loss determination. The net change may then be converted to US dollars and tax computed accordingly. This may insure insulation from currency fluctuations. Furthermore, maintenance of adequate domestic liquidity will avoid wasteful repatriation of foreign cash.

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