Irs Publication 564 - Mutual Fund Distributions

photographs and calling 1 – 800 – THE – LOST

clude your daytime phone number, including the

Certain year-end dividends received in

(1 – 800 – 843 – 5678) if you recognize a child.

area code, in your correspondence.

January. Dividends declared and made pay-

able by mutual funds in October, November, or

Useful Items

December are considered received by share-

holders on December 31 of the same year even

You may want to see:

Introduction

if the dividends are actually paid during January

of the following year.

Publication

This publication provides federal income tax in-

550

Investment Income and Expenses

formation for individual shareholders of mutual

Tax-exempt mutual fund. Distributions from

funds, including money market funds. It ex-

a tax-exempt mutual fund (one that invests pri-

Form (and Instructions)

plains how to report distributions paid to you by a

marily in tax-exempt securities) may consist of

mutual fund and any expenses connected with

ordinary dividends, capital gain distributions, un-

Schedule B (Form 1040) Interest and

your investment. In addition, it explains how to

distributed capital gains, or return of capital like

Ordinary Dividends

report undistributed long-term capital gains. It

any other mutual fund. These distributions gen-

Schedule D (Form 1040) Capital Gains

also explains how to figure and report your gain

erally are treated the same as distributions from

and Losses

or loss when you sell, exchange, or redeem your

a regular mutual fund.

mutual fund shares. A comprehensive example,

Distributions designated as exempt-interest

Schedule 1 (Form 1040A) Interest and

with filled-in forms, appears at the end of the

dividends are not taxable. (See Exempt-Interest

Ordinary Dividends for Form 1040A

publication.

Dividends, later.)

Filers

Mutual fund. A mutual fund is a regulated

1099 – B Proceeds from Broker and

Ordinary Dividends

investment company generally created by “pool-

Barter Exchange Transactions

ing” funds of investors to allow them to take

An ordinary dividend is a distribution by a mutual

1099 – DIV Dividends and Distributions

advantage of a diversity of investments and pro-

fund out of its earnings and profits. Include ordi-

fessional management.

2439 Notice to Shareholder of

nary dividends that you receive from a mutual

Undistributed Long-Term Capital

fund as dividend income on your individual in-

Money market fund.

A money market fund

Gains

come tax return.

is a mutual fund that tries to increase current

Ordinary dividends are the most common

income available to shareholders by buying

4952 Investment Interest Expense

type of dividends. They will be reported in box 1a

short-term market investments.

Deduction

of Form 1099 – DIV or on a similar statement you

Money market funds pay dividends and

See How To Get Tax Help near the end of

receive from the mutual fund.

should not be confused with bank money market

this publication for information about getting

accounts that pay interest.

these publications and forms.

Qualified dividends. Many ordinary divi-

Qualified retirement plans and IRAs. The

dends you received in 2003 are also classified

rules in this publication do not apply to mutual

as qualified dividends. The amount of your quali-

fund shares held in individual retirement ar-

fied dividends will be shown in box 1b of Form

Tax Treatment

rangements (IRAs), section 401(k) plans, and

1099 – DIV or on a similar statement you get

other qualified retirement plans. The value of the

from the mutual fund.

of Distributions

mutual fund shares and earnings allocated to

Qualified dividends are taxed at the same

you are included in your retirement plan assets

lower rates that apply to a net capital gain. They

A distribution you receive from a mutual fund

and stay tax free generally until the plan distrib-

are taxed at 15% if the regular tax rate that

may be an ordinary dividend, a qualified divi-

utes them to you. The tax rules that apply to

would apply is 25% or higher. They are taxed at

dend, a capital gain distribution, an exempt-

retirement plan distributions are explained in the

5% if the regular tax rate that would apply is 10%

interest dividend, or a nontaxable return of capi-

following publications.

or 15%.

tal. The fund will send you a Form 1099 – DIV or

To be a qualified dividend subject to the 5%

•

Publication 560, Retirement Plans for

similar statement telling you the kind of distribu-

or 15% rate, a dividend must meet all of the

Small Business (SEP, SIMPLE, and Quali-

tion you received. This section discusses the tax

following requirements.

fied Plans).

treatment of each kind of distribution, describes

•

how to treat reinvested distributions, and ex-

1) The dividend must have been paid by a

Publication 571, Tax-Sheltered Annuity

plains how to report distributions on your return.

U.S. corporation or a qualified foreign cor-

Plans (403(b) Plans).

poration. See chapter 1 of Publication 550

•

You may be treated as having received

Publication 575, Pension and Annuity In-

for the definition of a qualified foreign cor-

a distribution of capital gains even if the

come.

poration.

fund does not distribute them to you.

CAUTION

•

Publication 590, Individual Retirement Ar-

See Undistributed capital gains under Capital

2) The dividend must not be of a type ex-

rangements (IRAs).

Gain Distributions.

cluded by law from the definition of a quali-

•

fied dividend. See chapter 1 of Publication

Publication 721, Tax Guide to U.S. Civil

550 for a list of these types of dividends.

Community property states. If you are mar-

Service Retirement Benefits.

ried and receive a distribution that is community

3) You must meet the holding period require-

income, one-half of the distribution is generally

ment (discussed next).

Comments and suggestions. We welcome

considered to be received by each spouse. If

your comments about this publication and your

you file separate returns, you must each report

Holding period. You must have held the

suggestions for future editions.

one-half of any taxable distribution. Get Publica-

stock for more than 60 days during the 121-day

You can e-mail us at *taxforms@irs.gov.

tion 555, Community Property, for more informa-

period that begins 60 days before the ex-divi-

Please put “Publications Comment” on the sub-

tion on community income.

dend date. The ex-dividend date is the first

ject line.

If the distribution is not considered commu-

date following the declaration of a dividend on

You can write to us at the following address:

nity income under state law and you and your

which the buyer of a stock will not receive the

spouse file separate returns, each of you must

next dividend payment. Instead, the seller will

Internal Revenue Service

report your separate taxable distributions.

get the dividend.

Individual Forms and Publications Branch

When counting the number of days you held

SE:W:CAR:MP:T:I

Share certificate in two or more names. If

the stock, include the day you disposed of the

1111 Constitution Ave. NW

two or more persons, such as you and your

stock, but not the day you acquired it.

Washington, DC 20224

spouse, hold shares as joint tenants, tenants by

the entirety, or tenants in common, distributions

More information. See chapter 1 of Publi-

We respond to many letters by telephone.

on those shares are considered received by

cation 550 for more information about qualified

Therefore, it would be helpful if you would in-

each of you to the extent provided by local law.

dividends.

Page 2

Irs Publication 564 - Mutual Fund Distributions - 2003 Page 2

Related Articles

Related forms

Related Categories