Mutual Fund - why might one receive a 1099 DIV and a 1099 B?

Forum|Forum|4 years ago
February 23, 2022
6 replies
40 views

Hi,

I suspect I am not understanding the mechanics of mutual funds.

I have a mutual fund account with Primerica. As I understand from reading Investopia,

Mutual funds distribute income to shareholders through capital gains distributions or dividend distributions. Interest earned by a fund's assets is paid as a dividend distribution.

To avoid paying taxes on earnings, mutual funds are required to pass on all net income to shareholders at least once each year. "

So I understand that the 1099 DIV shows my taxable earnings. But I can't understand why I get a 1099 B when I redeem the mutual fund to get cash. I mean the 1099 B is basically a cost basis, dealing with earnings or loss, right? But if there are earnings, they are reported as dividends in the 1099 DIV, and I am paying taxes on those earnings.

Why does that seem like double taxation to me?

Can someone set me straight?

thanks!

AamilD

Alumni - Intuit

1099 DIV shows the dividend payout to shareholders from the profits of a company.

1099B shows capital gains or losses. So it will state the cost price and the selling price ( proceeds ) and the difference is the capital gain.

So it is not double taxation in a sense that 1099 DIV is a dividend which is given from the profits of a company to its shareholders while 1099B shows the the cost you paid to get that mutual fund and what you sold it for and the difference is the capital gain/loss.

bhuetherAuthor

Level 4

Thank you for the insight. The odd thing is, I don't get a 1099B from Charles Schwab. They send a 1099 DIV that shows capital gains. So just trying to wrap my head around why Schwab reports capital gains one way, and Primerica another way.