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Your total amount of gain is still $20,000, but now it's all long-term, meaning a lower rate of tax - if this special rule didn't apply! The $15,000 long-term gain you had before is increased by the $5,000 capital gain dividend from the mutual fund, and the $5,000 short-term gain you had before is eliminated by the $5,000 loss on sale of the mutual fund shares. Now your totals for the year are $20,000 of long-term capital gain and $0 of short-term capital gain. Then you sell the shares for a $5,000 short-term capital loss. You buy enough shares so you'll receive a $5,000 capital gain dividend. Your short-term gain will be taxed at your regular marginal rate of 31%.īeing a crafty investor, but unaware of the special rule we are discussing, you find a mutual fund that's about to pay a capital gain dividend. And that could provide you with a significant tax advantage if you also have short-term capital gains.Įxample: Throughout the year you had $15,000 of long-term capital gain and $5,000 of short-term capital gain. Under the normal rules, you would get a short-term capital loss. Then you sell the mutual fund at $28.25 - the value right after the dividend. You'll treat that dividend as long-term capital gain even if you held the mutual fund shares only a day before the dividend. Capital Gain DividendsĬonsider what would happen if you bought shares in a mutual fund at $29.75 just before the fund paid a capital gain dividend of $1.50.
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The special tax rules for short-term losses in mutual funds are designed to eliminate that advantage. If the dividend was an exempt interest dividend or a capital gain dividend, the combination of the dividend and the short-term loss would give you an unfair tax advantage. In that situation you might be able to claim a short-term capital loss that was really just a reflection of the dividend you received. Suppose you bought the mutual fund shares just before the dividend and sold them shortly afterward. But it means a special rule is needed for certain capital losses on mutual fund shares. No problem there - that's just the way stocks work in general. For example, if your mutual fund shares are valued at $29.75 immediately before a dividend of $1.50 per share, the value will be $28.25 immediately after the dividend. When a mutual fund pays a dividend, the value of the fund goes down by the amount of the dividend. These rules may convert some or all of your short-term loss into long-term loss - or into a nondeductible loss. Should a deal go ahead, Stagecoach's chairman Ray O'Toole, a former chief operating officer at National Express, would become chair of the combined group, while National Express chief executive Ignacio Garat would continue as CEO of the merged entity.This page explains the special rules that apply to certain short-term losses from sales of mutual fund shares. The companies said that discussions and due diligence remained ongoing and there could be no certainty of a formal offer. the pandemic impact on passenger volume and capex headwinds related to the adoption of environmentally-friendly vehicles," Citi said in a note.
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"We have argued for consolidation in the UK Public Transport given the structural challenges facing the industry, i.e. Rival UK operators FirstGroup (FGP.L) and Go-Ahead (GOG.L) also rose around 3% on news of the potential deal.
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Stagecoach runs the megabus service, which like National Express, operates coach services between British cities.Ĭiti analysts said the deal would be positive for the transport sector. The companies said the tie-up would make pre-tax cost savings of 35 million pounds per year through efficiencies such as National Express utilising Stagecoach's depots for its coach operations. Transport usage is starting to recover as workers return to offices, but is still not near its pre-pandemic levels. National Express rose 7% to 239 pence per share, giving it a market value of 1.48 billion pounds.ĭuring the pandemic, both Stagecoach and National Express received government support to keep services running when passenger numbers were down, but that funding will end in the coming months. Stagecoach's stock jumped 20% to 81 pence in early trading on Tuesday. That represents an 18% premium on the closing price of Stagecoach's shares on Monday. Under the terms of the potential takeover, Stagecoach shareholders would receive 0.36 new National Express shares for each Stagecoach share, giving them a 25% stake in the merged group. They still own stakes in the company - Souter has about 14.55% and Gloag around 10.47%, based on Refinitiv data. The company was founded by Brian Souter and his sister Ann Gloag in Perth in 1980, starting out with just two buses bought with their father’s redundancy money. Stagecoach, solely focused on Britain, is the country's biggest bus and coach operator.