Logansport Pharos-Tribune from Logansport, Indiana • Page 11

Friday, June 1, 1984 Pharos-Tribune, Logansport, Indiana Page 11 Business Investors' By William Doyle Capital Gains Distribution Q. 1 am really confased about the capital gains from the mutual fund in which I have invested. Exactly what is a capital gains distribution? A. It's your share of the net profit the mutual fund has realized by selling securities it held. The typical mutual fund invests in many different stocks and-or bonds.

In the normal course of its operations, the fund sells some of those securities and buys others some at higher prices than it paid, some at lower prices than it paid. Assuming the fund turns a profit on those "portfolio transactions," it will have a "net realized capital gain." which it then distributes to you and its other shareholders. Let's say, in its latest fiscal year, XYZ Mutual Fund had a net realized capital gain of exactly $5 million and that fund has exactly one million shares outstanding owned by investors. XYZ Mutual Fund will make a capital gains distribution of $5 per share. If you own 100 shares of that fund, you'll get a $500 capital gains distribution.

Q. Why do I have to pay income tax on capital gains distributions from my mutual fund? A. Because profits from, the sale of securities and other capita! assets are taxable. Uncle Sam's not going to forgive you taxes just because you're getting your profits from securities sales through a mutual fund. However, one layer OL taxation is removed.

Because your mutual rand distributes its profits to its shareholders, the fund does not have to pay tax on those profits. By acting as a "conduit" and passing on those profits the fund eliminates double taxation. The net profit a mutual fund passes on from the sale of securities it held for more than a year is a long-terrr. capita! gains distribution only 40 percent oi wnicn is subject to federal income tax. The fund's net from the sale of securities held for one year or less is a short-term capital gains distribution ai! of which is taxable.

Q. I reinvest, the capital gains distributions from my mutual fund and doo'i sec-; I have to pay tax on them. What do you sayV A. You don't any choice, assuming you're an honest taxpayer and-or don't want to be nabbed by the internal Revenue Service, which gets information about capital gains distributions, dividends suen to feed into its computers. Many investors feel the same way you do.

However, you have your choice of taking your fund distribution by check or reinvesting them to buy more shares Either way, you're required to pay income tax on them. Q. I hold stock tor my son in gift to minors account. 1 tne dividends in his savings account and report, those dividends on my income tax return. Is the correct way to handle this? A.

No! No! No! You're doing the right thing by putting the dividends in your son's savings account because those dividends belong to him. But there's no reason to report those divi- on your income tax re! urn. That results in you paying tax or; his dividends. If any tax is due on those div-c'onds, your son should pay it-net you. Q.

It seems to me I lose money every time my mutual fund makes a capital gains distribution. If I reinvest the distribution, I have more shares, but I have to pay tax on the additional shares. If I take tie "distribution Dy check, I have to fay tax on 40 percent of the long-term gain and 100 percent of fhe short-termgaiB. No matter which choice I make. I stili end up with a lower total of shares and money.

Have I miscalculated somewhere? A. Your calculations are correct. But, unless you consider paying taxes as "losing money," your reasoning is somewhat out of whack. We're all required to settle up with the IRS. That leaves us with less money and-or other things.

I don't know anyone who enjoys paying taxes. However, that unhappy process can't be defined as a "loss" in any bookkeeping or accounting terms. Dovle Js a syndicated columnist with King Features Syndicate. York. He welcomes written questions, but can provide answers only through the column.

Jobless Rate Falls To 7.5% May unemployment figure lowest in three years WASHINGTON (UPI) The nation's unemployment rate fell to 7.5 percent in May, the lowest point in three years, after holding steady at 7.8 percent from February through April, the Labor Department said today. The improvement created a total of 890,000 jobs during the month and took 330,000 people off the unemployment rolls. The May figure marks the first time since the recession that the jobless rate has fallen back to where it was when President Reagan took office in January 1981. The nation's jobless rate has fallen 3.2 percentage points since its 10.7 percent peaks in November and December of 1982. The May report also showed factory workers were employed fewer total hours as the length of the average workweek shortened by half an hour to 40.7 hours.

Economists watch that figure closely to gauge how much income is available for spending in the weeks ahead. The figure suggests a mild slowdown is under way. In spite of the overall improvement, factory jobs did not increase in May, a distinct change from the pattern of the previous several months. While adult men made up most of those who had presents the CIVIC PLAYERS with excerpts from The Mikado" Soturday Only 2:00 P.M., 4:00 P.M., 7:00 P.M. their jobs restored, women took most of the new jobs created in May, the department said.

The jobless rate for black workers improved a fuil percentage point, going from 16.8 percent to 15.8 percent. The rate for white workers improved less, going from 6.7 percent in April in 6 4 percent in May. The jobless rate for all adult men fell from 6.9 percent to 6.5 percent. Even with the May gains, the jobless rate for adult women stayed higher, at 6.8 percent compared with 7 percent in April. The department conceded it had a harder than usual time figuring out how many graduates entered the workforce and said the amount of new jobs creaied may be overstated for the month.

An alternative unemployment rate that includes military personnel dropped to 7.4 percent in May. The first decline in the jobless rate in four months brought the number of people without jobs down to 8.5 million, after seasonal adjustment, the department said. The number of people with jobs, which grows to a new all-time high every month, reached 105.3 million in May. The average time spent without a job remained virtually the same, 18.4 weeks compared with 18.5 weeks in April. While more people were on the job, they were paid, on average, four-tenths of a percent less hour, the department said.

The average each age was SS.28 an hour. The unemployment rate for Hispanic workers dropped a percentage point to 10.5 percent in May. WASHINGTON iuPD President Reagan has enhanced his influence with the Federal Reserve by selecting a supportive conservative economist, Martha Seger, to replace liberal Nancy Teeters on the central bank's board of governors. Reagan announced Thursday be norr.inaie Ms. Seger as the Fed's newest governor And although the announcement was not unexpected.

the former Michigan state banking commissioner evofced raised eyebrows with her initial reaction. "I want to thank the president jecavae support everything he's she said. WASHINGTON Allegheny Corp. say-; its jffer to buy the government-owned i Consolidated Rail Corp would i and routes oi the giant freight carrii'-r, out an i influential senator is againsl the bid. Nowspuper Asks OES MGINLIS, Iowa An has called (or the resignation of U.S.

Agriculture Secretary John Block, fanning operations in Illinois may be- tr.itn $10 million in debt. Bo UAVV Strike Turi-ot PITTSBURGH Giant General Motors Corp. vvii! be the strike target in comrac; negotiations that begin this summer with am. Ford Motor a union official said UAW ice-President Donald EprJin, who heads the union's GM department, said that local strikes are a weapon in iocai bargaining but these wouic! come after the Ford settlement, "seeing as how we he I Prosecution l.Tged For LOS ANGELES A federal strike force wants the Justice Department to approve prosecution of Teamsters President Jackie Presser for allegedly hiring ghost employees in his local, a published report said today. Stocks Post Gain NEW YORK (UPI) The slock market scored a small gain in moderately active trading Thursday on investors hopes the economy is slowing a pace that will lower interest rates.

Brokers said prices C(Htlo continue rising at ihe outset today if institutions coma tc the conclusion Wall Street's long 1984 slide has run its course. WHILE QUANTITIES LAST Brisk sales of Mother's Day gifts i'ic apparei heipec the nation's major retaiiers ring up gains at the cash register in May even r.hough consumer is slowing, anaiysls said Thursday. Sears, Roebuck i the largest U.S. retailor based in Chicago, its May iiios including Sears Inc roso 6.1 percent 'row May 1983 levels. mart, che NV 2 taiier Troy, had percent May sales.

Thirv-- ranked J.r i'orK. V- Sales Up Retail Sales of major department store chains Total Sales (in billions) Percent $1.61 JCPenney $.891 Federated Stores $.689 Dayton-Hudson Corn. $.560 Vcir Devious year UPi Dili-cent gain, largest based in Federated Depart- Cincinnati, logged an Stores, the fourth 11.9 percent rise. Money Money Fund Assets Up NEW YORK (UPI) Assets of money vnarket mutual funds increased $121.5 million to $.175.17 billion in the reporting week, the Investment Company institute reported 1 Thursday. The Washington- based trade group said it was the fourth consecutive weekly increase.

Fund assets went up $5.1 billion over the four weeks. NEW YORK 'UP! The nation's money supply rose $3.3 billion in the latest week, but the bond market rallied despite the increase on a perception that tiie Federal Rsserve will not tighten in the uncertain banking environment. The laiiSi rise was the fcurth consecutive increase in "he money supply known as Ml and leaves th.s key measure just $600 million below the upper end of the Ftci's growth target. But the bond marke'i, encouraged by "at least a hint" that the miahr. 'ne slowing and the perception that concerns abcut the banking industry will kee" --K Fee or an policy stance, rebounded sharply.

Thursday, May 31, 1984 Prime Rate: 12.50 Discount Rate: 9.W! Bankers Acceptance: 30 to 59 days 10.73 60 to 89 days 10.90 90to119days 11.15 120 to 149 days 11.35 150to179days 11.43 180 (0 270 days unquoted Commercial Paper (range): Dealer 30-180 10.20 issuers 30 days 10.30 Issuers90days. 10.31 issuers 270 days 10.18 Source: Telerate Systems Inc. United Press International HERS Steak. 4.99 ea. Value Sirloin Steak 5.79 ea.

6.79 ea. -C of the above Steak dinners include: Potato, warm roll and 50 item AJI You-Can-Eat salad bar. Your choice of either 3 Shrimp, 1 piece of fish or I piece of chicken breast. Meals Jr. Hamburger or Hot Dog with pudding or Jella LOGANSPORT 3101 George Street 1515 Brae wick Marion.