Process for liquidating a mutual fund

process for liquidating a mutual fund-62
CIMA allowed a transition period before the new RP in regard to audits would be enforced which will come to an end on 1 October 2015.De-registration The Rule and RP apply to Funds which are regulated by CIMA under the Mutual Funds Law 2015 Revision (‘MFL’).For mutual fund shares purchased prior to 2012, the article below still serves as a guide to selecting the appropriate, historic cost basis method.

CIMA’s current practice on the Stub audit waiver will come to an end on 1 October 2015.(If you're selling shares and moving the proceeds into a different fund in the same family with a reduced load charge, you must have held the shares for more than 90 days to include the load charges in the basis.) You should also include in the cost basis any dividends or capital gains distributions that you reinvested to purchase more shares.You'll still owe tax on any capital gains distributions or dividends that you reinvest, but because they'll be counted toward your basis, you won't be taxed again when you sell the shares.Determining the cost basis of your shares can be a tricky business, though.But no matter how frustrating the process seems, it's a crucial step.Even if you move money from one fund into another in what seems like a single, seamless transaction, a taxable event still has occurred.You'll owe tax (or can claim a loss) on the sale, and the amount you transfer to another fund will serve as the initial cost basis for that fund.If you would like to discuss this option or for more information or help with the new Rule and RP, contact us on [email protected]: Since this article was originally published, new legislation requires that mutual fund providers calculate -- and report to the IRS -- the cost basis for all mutual fund shares purchased after Jan. Investors can choose from a minimum of three cost basis accounting methods.For Funds that will de-register after 1 October 2015 we recommend planning to use a third party liquidator to conduct a voluntary winding up and aiming to pass the resolution to go into voluntary liquidation (which will commence the winding up) to coincide with the end of the Fund’s financial year, so avoiding any need for a Stub audit for the next financial year.A Stub audit could also be avoided without using a third party liquidator if it is ensured that the final distribution coincides with the end of the financial year.

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