Are there other types of distributions from a mutual fund that may not qualify to be taxed at the lower federal long-term capital gain tax rates of 15% or 5%?
Yes. Mutual funds should generally be able to pass qualified dividends taxed at the lower rates through to their shareholders. Mutual fund distributions attributable to amounts received by the fund other than qualified dividends however, such as interest and short-term capital gains, should continue to be taxed at the federal level at ordinary income rates. “Ordinary dividends” (as reported on a Form 1099-DIV) a mutual fund distributes, may consist of up to four components: qualified dividends, non-qualified dividends, interest and short-term capital gains. Only the portion of a mutual fund’s distributed ordinary dividends that is attributable to qualified dividends from its underlying investments should be taxable at one of the lower rates. Mutual funds should determine the portion of distributions attributable to qualified dividends, and the qualified dividend amount should be reported as such to shareholders that received the distribution. Many mutual funds will distribute two types
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