I heard there is a proposed law that would allow investors to not pay taxes on dividends from stock funds until sold. I was then thinking about all the taxes that have already been paid over the years. When you sell the fund and pay tax, isn't that the third time that money has been taxed? What am I missing?
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Not Double Taxed
When you pay tax on dividends and those dividends are reinvested, your basis in stock is increased by the amount of dividends reported. You are not taxed again when the stock is sold. Your gain on the sale will be reduced (or your loss increased) by the amount of dividends you've been taxed on along the way.
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