If I don't ever sell stock, why do I get capital gains income? Should I dispute this?

[laclair2771]

I get a 1099-DIV and it shows 2a, capital gains income. It has always been reinvested. Do I understand this incorrectly?

[MonikaK1]

Report all Dividend income as shown on Form 1099-DIV.

If you own stock and reinvest the dividends, you still report the dividends as income in the year they are paid. They are used to purchase shares or fractional shares of the underlying stock. When you sell shares, these dividends on which you paid tax, become part of the cost basis of the shares and are used to reduce your gain/increase your loss on the sale.

See reinvested dividends in this link about Cost Basis. 

Capital Gain Dividends are dividends that a mutual fund corporation elects to pay out of its capital gains dividend account.

See also this TurboTax tips article regarding Dividends.

[fanfare]

Box 2a is taxable, even if you reinvest the money automatically.

@laclair2771 

[AmeliesUncle]

Is it from Mutual Funds?  If so, the Mutual Funds sold some things, and that capital gain distribution is passed on to you.