The provision would prevent investors from minimizing taxes by choosing the specific shares that are being sold when they sell part of a position. Instead, investors would have to sell their oldest shares first.
If this passes, this would have monumental implications for the investment management industry, especially passive strategies like ETFs. Suddenly, mutual funds that have been holding on to certain lots for decades will be generating huge capital gains that will have to be distributed to investors. Think of all the turnover that will occur at the end of the year as investors try to reset their tax cost basis. The vintage of a mutual fund would now be paramount, as nobody would want to invest in an older fund with embedded gains. I'm sure Vanguard is doing everything they can at the moment to prevent this from happening.
Submitted November 15, 2017 at 10:12AM by Rossco14 http://ift.tt/2ihb1No
