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Tax Treatment of Distributions
A distribution you receive from a mutual fund may be an ordinary dividend, a qualified dividend, a capital gain distribution, an exempt-interest dividend, or a nondividend distribution. The fund will send you a Form 1099-DIV or similar statement telling you the kind of distribution you received. This section discusses the tax treatment of each kind of distribution, describes how to treat reinvested distributions, and explains how to report distributions on your return.
Dividend Distributions ... read section
Capital Gain Distributions ... read section
Miscellaneous Distributions ... read section
What's New for 2007
Foreign tax credit. Some mutual funds or other regulated investment companies (RICs) invest in foreign securities or other instruments. If you claim a foreign tax credit in 2007 on your share of the foreign taxes paid by the mutual fund or other RIC, you no longer have to report the income or taxes paid on a country-by-country basis. You can summarize the reporting of the income and taxes on Form 1116, Foreign Tax Credit. See Form 1116 and its instructions for more information.
What's New for 2008
Maximum tax rate on qualified dividends and net capital gain reduced. In tax years beginning after 2007, the 5% maximum tax rate on qualified dividends and net capital gain is reduced to 0 (zero)%. Thus, qualified dividends and net capital gain are not taxed if the regular tax rate that would apply to them is lower than 25%.
