Do I pay Income TAX on Capital Gains/Dividens etc. made in a ROTH?

[Guest Bernard]

I understand that the distributions are tax free (under the qualifying rules of the Roth). However I wonder if the Dividends/Capital Gains paid in, for instance a mutual fund, that are reinvested are taxable. Can somebody answer this maybe simple question for me.

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Bernard Hamburger

[Guest P A Weick]

If it is in a Roth, the income or capital gains distributions which the mutual fund reinvests should be tax free.

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[This message has been edited by P A Weick (edited 06-05-99).]

[John G]

No taxes due on any transaction. None on dividends, none on capital gains. No differences between long term and short term gains.

Note this can have an interesting impact on investment choices since there is no difference between short term or long term gains. Holding period is irrelevant! For example, you can buy a stock at $24 and if it spikes to $36 five days later you can sell it for a 50% gain and have no tax consequence. Outside of the Roth, you would give up a significant part of this gain to taxes.