From: "raylopez99" 
Newsgroups: misc.invest.financial-plan
Subject: Re: Model ETF/Mutual fund portfolio for wealth preservation?
Date: Tue, 11 Apr 2006 06:39:14 -0500
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Thanks Rich, that analysis seems sound.  I'll keep it in mind.  The
only wiggle I can add, that might still justify picking a
'tax-efficient' fund rather than a non-tax-efficient fund (and I think
we all agree that deferring tax is not such a big deal, if at all, from
an investment point of view, in that the real rate of return is roughly
the same for 'tax-efficent' versus 'non-tax-efficient' funds, putting
aside the 'step up basis' inheritance issue at the death of the fund
holder), the only wiggle is this (and it is a metaphysical wiggle):

It seems to me that if the IRS does not know, because they don't get
that many year-end distributions from you, how much money you have
invested (since an IRS agent, if she gets a 1099 from QQQQ, which
according to Morningstar has a tax cost ratio of 0.10%, where you have
$1M invested, might see $1k in a year end distribution, but if you had
the same $1M in Fidelity Magellan fund, which has a 1.34% tax cost
ratio, the IRS would see $13.4k per year on average) the better off you
are, to the extent the IRS targets 'rich' people using their secret DIF
function.  But this argument is metaphysical since nobody really knows
what the DIF function is.  But in my mind the less the government
"readily" knows (readily, since they can find out anything about you if
they spend enough time or money), the better off you are.

RL