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Purpose High Interest Savings Fund (PSA $50.08)
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Global X Cash Maximizer Corporate Class ETF (HSAV $118.22)
Q: Hi 5i,
I have a bit of a tax-treatment question for ETFs like PSA held in taxable accounts. Assuming one is in the top tax bracket, should they not look to make monthly sales right before ex dividend so that the 'growth' in share price gets taxed as a capital gain vs. having the distribution pushed out as income? Am I thinking about this correctly? The total tax owing would roughly be cut in half. Assume trades are zero commission for simplicity :)
I have a bit of a tax-treatment question for ETFs like PSA held in taxable accounts. Assuming one is in the top tax bracket, should they not look to make monthly sales right before ex dividend so that the 'growth' in share price gets taxed as a capital gain vs. having the distribution pushed out as income? Am I thinking about this correctly? The total tax owing would roughly be cut in half. Assume trades are zero commission for simplicity :)
5i Research Answer:
This can work, in theory, but can be a pain to do monthly. In addition, there will be some bid/ask drift. A better solution in our view is to own a total return ETF such as HSAV, where there are no distributions and thus tax is always shifted to capital gains. There is sometimes a premium on the fund because of this but it does vary and this is a simpler solution than 12/12 buys/sells yearly.