Capital Gains Question

Robert11 · Joined: 25 Aug 2007 Posts: 23

Hello,

On in years, and not too sharp with this stuff anymore.
Probably a dumb question, but please bear with me.

Have a mutual fund.
Pays Dividends, and this year had a Capital Gain.

But the value (share price) was down for the year.

Are we still responsible for paying on our 1040 the Dividends (as interest)
and the Cap. Gains, even though thwee value went down ? We did Not sell it.

Thanks,
B.

Archived from group: us>taxes

Paul Thomas, CPA · Joined: 25 Aug 2007 Posts: 3094

"Robert11" wrote
> On in years, and not too sharp with this stuff anymore.
> Probably a dumb question, but please bear with me.
>
> Have a mutual fund.
> Pays Dividends, and this year had a Capital Gain.
>
> But the value (share price) was down for the year.
>
> Are we still responsible for paying on our 1040 the Dividends (as
> interest) and the Cap. Gains, even though thwee value went down ? We did
> Not sell it.

Dividends are taxed as dividends. They should tell you total dividends and
what part of that is qualified dividends.

The capital gains are taxed (and increase your cost basis) at the prevailing
capital gains rates.

The workings of a mutual fund are that you "own" hundreds of companies, and
when the fund sells off one of those companies they create gains that are
passed through to you and every other holder of the fund.

--
Paul A. Thomas, CPA
Athens, Georgia

Phil Marti · Joined: 25 Aug 2007 Posts: 2520

"Paul Thomas, CPA" wrote:

>> Have a mutual fund.
>> Pays Dividends, and this year had a Capital Gain.
>>
>> But the value (share price) was down for the year.
>>
>> Are we still responsible for paying on our 1040 the Dividends (as
>> interest) and the Cap. Gains, even though thwee value went down ? We did
>> Not sell it.

> Dividends are taxed as dividends. They should tell you total dividends
> and what part of that is qualified dividends.
>
> The capital gains are taxed (and increase your cost basis) at the
> prevailing capital gains rates.

Just to clarify here, mutual fund dividends also increase your basis if you
reinvested the distribution. IOW, if they made a $100 distribution of
combined dividends and cap gains and you reinvested that, your total basis
in the fund went up $100, not just the portion attributable to cap gains.

--
Phil Marti
Clarksburg, MD