I understand why high net worth individuals with a significant amount of money invested through taxable accounts pay a lot of attention to the tax structure of their investments. If you are a high earner that taxably invests in REITs, for example, you could be looking at a 39.6% federal tax rate. If you live in a high state tax locale such as California, you could be looking at another 13.3% in taxes. A California doctor investing in a real estate investment trust in a taxable account could be paying out 52.9% of each dividend received.
To ward off the escheation of a high earner’s wealth, mutual funds have sprung up in recent years that advertise themselves as “tax managed mutual funds” that offer three benefits designed to appeal to high earnings:
First, tax-managed mutual funds adopt a preference for selling only those appreciated investments that have been held for … Read the rest of this article!