I use QEF to minimize taxes for my open ended fund. Is filing 1294 a brilliant idea to avoid paying taxes on unrealized gains or what?
It could be a good idea in the right situation. I am not sure brilliant is the right term. You would have to pay interest on any deferred income. I believe the current rate is 7%.
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How do you decide if you want to defer or not in this case?
I’m not familiar with 1294, but in general it seems like asking
Do you want to pay taxes on this now, or take a loan at 7% to pay the taxes later.
Which is a question for you/your tax guy in terms of planning your spending, no obvious right or wrong answer.
FWIW, long term (like 20+ years) SPY returns about 7% in real terms, so in theory this is a slight positive expected value trade to take the loan, since I assume that is 7% nominal, not real. But then again you’re hopefully not holding this investment that long term!