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BUSINESSMonday 7 December 2015
Of Mutual Interest: Wal-Mart suing
Puerto Rico over
Despite flat market, many funds will deliver taxable gains ‘unfair’ tax hike
STAN CHOE fund in a taxable account, The main reason for the ers expect to pass along SAN JUAN, Puerto Rico (AP)
AP Business Writer even if you didn’t sell any jump is that AIG did what distributions of $3.74 per — Wal-Mart’s Puerto Rico
NEW YORK (AP) — Never shares. Long-term gains shareholders hoped it share, which is about 9 per- operation is asking the fed-
mind that this year has generally qualify for lower would after Fairholme Fund cent of its total assets, as eral court in San Juan to
largely been a dud for rates than short-term gains. bought it in 2010 and 2011: of Wednesday. Last year’s void what it calls an “oner-
stocks. A tax bill is still com- The value of your holdings It surged. AIG generated was $1.63. ous” and “unconstitution-
ing for many mutual-fund won’t normally change as more than $2 billion in gains Earlier this year, one of its al” tax that unfairly targets
investors. a result of the distribution, for the fund by June of this investments, Medtronic, the U.S. retail giant.
Now that December is It said in court papers filed
here, funds are lining up Trader George Ettinger works on the floor of the New York Stock Exchange. Never mind that this Friday that the increased
to pass along something year has largely been a dud for stocks. A tax bill is still coming for many mutual-fund investors. levy on purchases from
called a capital-gains dis- U.S.-based Wal-Mart distri-
tribution to their sharehold- (AP Photo/Richard Drew) bution centers by its island
ers. It’s about as appetizing entities constitutes one of
as it sounds. which often gets reinvest- year. And when it sold AIG completed its $42.9 billion the world’s highest taxes
Investors who hold mutual ed in the fund. The price shares, it recorded a big acquisition of Covidien. and pushes its effective tax
funds outside a 401(k) or of each fund share in this gain. Another reason for The deal created a tax bill. rate to 91.5 percent of net
another tax-advantaged example would drop to $8 this year’s rise in distribu- The fund also recorded big income. The tax increase
account must pay taxes on when it made the distribu- tions is the explosion in cor- gains from sales of its hold- will cost Wal-Mart $155
these distributions, even if tion of $2, leaving you with porate takeovers. Compa- ings in Automatic Data Pro- million over six years and
they don’t sell any shares. the same $10 per share. nies are finding it difficult to cessing and Equifax . make its Puerto Rico busi-
And the bills could be big: The Fairholme Fund ex- drum up revenue growth The fund took the unusual ness unsustainable.
More than a dozen funds pects to make distribu- given the still-tepid global step of explaining what The suit says that Puerto
have already said they ex- tions of $11.55 to $12.35 economy, so they’re buy- was behind the distribution Rico’s Act 72 specifically
pect to pass along distribu- per share next week. That’s ing competitors instead. to shareholders in a notice targets “megastores” such
tions in coming weeks that equal to about 35 percent Others are combining in on its website and in gener- as Wal-Mart that have U.S.
are more than 30 percent of the fund’s assets, as of cross-border deals to lower al conversations, says Dave mainland-based related
of their total assets. Wednesday, and would their tax rates. Mertens, managing direc- entities because local op-
Several factors are be- dwarf last year’s distribu- At the Jensen Qual- tor at Jensen Investment erations are exempt from
hind this year’s distribu- tion of $3.08 per share. ity Growth Fund, manag- Management. q the tax. It said Treasury Sec-
tions, from home-run stock retary Juan Zaragoza and
picks made years ago to other top government of-
the recent surge in corpo- ficials untruthfully accused
rate takeovers. But first, a it of evading taxes by ma-
reminder on what causes nipulating the prices paid
distributions and how they between related entities
affect investors. to underreport Puerto Rico
When a fund sells a stock, it income.
records how much it made “In addition to punishing
or lost on it. At the end of multi-national corporations
the year, it totals the gains for assumed tax evasion,
it made from trading and Act72’s precursor also had
distributes those gains to an additional purpose: To
shareholders. protect and promote lo-
Say you hold a mutual fund cal businesses,” the suit
whose shares currently states.
trade at $10 each. That Puerto Rico Treasury De-
fund may distribute $2 per partment officials did not
share in capital gains to immediately respond on
you at the end of the year. Saturday to requests for
You have to pay taxes on comment.
those gains if you hold the The lawsuit argues the
tax violates the interstate
Head of China’s 4th largest bank resigns amid probe commerce and equal
protection clauses of the
BEIJING (AP) — The head of comes amid an ongoing two years’ probation in nation took immediate ef- U.S. Constitution and Fed-
campaign against corrup- October after being inves- fect and that there were eral Relations Act. It asks
China’s fourth-largest state tion in the Chinese govern- tigated by the ruling Com- no matters in relations to the court for swift action
ment, the military and state munist Party’s anti-corrup- his case that should “be because the common-
bank has resigned citing industries. tion watchdog body over a brought to the attention of wealth’s fiscal crisis may
A massive stock market sell- series of cases. Reports also the shareholders or credi- impede its ability to refund
personal reasons amid re- off over the summer has said a subordinate in the tors of the bank.” tax payments found to be
also lately focused investi- bank’s Shenzhen branch With the economy slow- unconstitutional.
ports of his involvement in a gators’ gaze on the finan- had been placed under ing, profits among China’s The government an-
cial sector. investigation for corruption top four state-run banks nounced in June it would
corruption investigation. The respected financial earlier in the year. slumped in the first three seek to restructure its near-
weekly Caixin reported A notice Friday on the Hong quarters of the year, with ly $72 billion debt with an
No details were given that Zhang had been de- Kong stock exchange’s Agricultural Bank’s rising by economy that has been
moted and placed under website said Zhang’s resig- just 0.57 percent. q declining for more than a
about the departure of decade.q
Agricultural Bank of China
president Zhang Yun, ac-
cording to reports appear-
ing Saturday.
The resignation of the
56-year-old executive