TY  - JOUR
AU  - Johnson,Woodrow T.
AU  - Poterba,James M.
TI  - Taxes and Mutual Fund Inflows Around Distribution Dates
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13884
PY  - 2008
Y2  - March 2008
UR  - http://www.nber.org/papers/w13884
L1  - http://www.nber.org/papers/w13884.pdf
N1  - Author contact info:
Woodrow T. Johnson
Department of Finance
University of Oregon
385 Lillis
1208 University of Oregon
Eugene, OR  94703
Tel: 541/346-3558
Fax: 541/346-3341
E-Mail: wtj@uoregon.edu

James M. Poterba
NBER
1050 Massachusetts Ave
Cambridge, MA 02138
Tel: 617 868 3907
Fax: 617-868-7194
E-Mail: poterba@mit.edu
AB  - Capital gain distributions by mutual funds generate tax liability for taxable shareholders, thereby reducing their after-tax returns.  Taxable investors who are considering purchasing fund shares around distribution dates have an incentive to delay their purchase until after the distribution, since this will reduce the present value of their tax liability.  Non-taxable shareholders, such as those who invest through IRAs and other tax-deferred accounts, face no such incentive for delaying purchase.  This paper compares daily shareholder transactions by taxable and non-taxable investors in the mutual funds of a single no-load fund complex around distribution dates.  Gross inflows to taxable accounts are significantly lower in the weeks preceding distribution dates than in the weeks following them, but gross inflows to tax-deferred accounts do not change around these dates.  This finding suggests that some taxable shareholders time their purchase of mutual fund shares to avoid the tax acceleration associated with distributions.  Taxable shareholders who purchase shares just before distribution dates also have shorter holding periods, on average, than those who buy after a distribution.  The cost of the distribution-related tax acceleration for pre-distribution buyers is therefore somewhat less than that for those who buy after the distribution.
ER  -