FYE 2012- A Golden Window of Opportunity to Harvest... Gains?
Posted by Investment Management Group Jan 12, 2012 12:00:03 PM
As many portfolio managers are familiar with the concept of harvesting losses in an effort to be as tax efficient as possible, the idea of harvesting gains probably sounds strange. However, fiscal year 2012 may be a year where it is more tax efficient for regulated investment companies to harvest gains instead of losses. In December 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was passed into law to much fanfare from the industry. Most provisions of the Act are effective for fiscal years beginning after the date of enactment, which in most cases starts with fiscal years ending December 31, 2011 and beyond. One of the beneficial provisions of the Act was the elimination of the expiration of the carry-forward of losses realized in fiscal years beginning after the date of enactment. Pre-enactment losses remained subject to expiration. One tiny little detail of the Act that is not frequently discussed is that, although post-enactment losses are no longer subject to expiration, they must be utilized before a fund can utilize any pre-enactment losses, which are subject to expiration. Therefore, there is now a greater likelihood that pre-enactment losses will expire worthless, depriving the fund and its shareholders the benefits of tax loss harvesting prior to December 2010.