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Morningstar, Inc. Commentaries

Deck the Halls With Higher Tax Bills

Dec 23, 2013

Click here to access Deck the Halls With Higher Tax Bills

While the holiday season is generally filled with cheer, some closed-end fund investors may say "Bah, humbug!" thanks to higher tax bills this year. Investors in traditional open-end funds are quite familiar with the year-end tradition of special distributions. And although CEFs are required to distribute nearly all of their realized gains and income earned during the year to maintain their status as a registered investment company, CEF investors are often removed from this ritual. That's partly because managed and level distribution policies allow CEFs to pay capital gains throughout the year. In fact, as of mid-December, 13% of all CEFs had managed distribution policies (a stated, predetermined percentage of net asset value is paid out each year, with payments spread evenly throughout the year) and more than three fourths had level distribution policies (the same dollar amount is paid each period, usually monthly or quarterly).

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Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individuals, financial advisors, and institutions.

Morningstar provides data on more than 385,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services and has approximately $195 billion in assets under advisement or management as of Sept. 30, 2012. We have operations in 27 countries.