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Yes, that is how it works. It doesn't matter what your cost basis is, you're going to get the full dividend, so essentially your cost basis is what the fund price was on Jan 1st, 2007. That's why you can get suck with a big tax bill even if you only owned it for a few months or weeks. If you get out of the fund before the dividend record date, you can pay capital gains based on your cost basis. Then get back in a day later (or Jan 1, or whatever you want).Hope that helps!