Quote:
Originally Posted by Barry-xlovecam
Retirement money basis are tax differed or already taxed once (and non taxable again) -- anyone that has retirement funds would know that.
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you must have misunderstood what I meant....
you have $100 to invest, you figure Exxon is a good company, and so you buy 1 share for $100...
at the end of the year Exxon prepares their financial statements and after expenses their net income is $10/share.... so with your single $100 share of Exxon, you earned $10, that's not too bad, a 10% ROI!
but wait a min, that $10 isn't really yours yet, Exxon needs to file taxes and pay 35% to the government... they do that, and so you end up with $6.50... pleased with your stock picking skills you take that $6.50 and buy yourself a starbucks coffee...
but wait, there is more to the story!
few weeks later you get a 1099-div form from your broker with $6.50 marked on it, you take it to your accountant complaining: "fuck is this?!", and he tells you "sorry bud, but 35% isn't enough, you need to pay another (up to 20%) tax on that"... you pay that 20% tax and end up with close to $5 from the original $10 you actually earned...
(of course this doesn't even include state/local/etc taxes, so in reality you are looking at less than $5 from the $10 you actually earned, but we'll omit this minor detail for now)
but so long story short, if Exxon doesn't pay 35%, but pays 15% instead, your cut would be about 30% higher...
and if the cut is 30% higher, then price of original asset would be 30% higher too... that's because if investing $100 to get $5 after all the taxes is a fair price, then paying ~$130 to get ~$6.50, would be equally fair...