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Why is capital gains entered into line 13 if nothing was sold?

I have *NOT* sold any investments in 2016.
However, on my 1099-DIV I have a capital gain distribution (box 2a) of $13,000 which gets entered onto line 13 of income on my 1040.
I don't understand why this is considered income.
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1 Best answer

Accepted Solutions
HelenaC
New Member

Why is capital gains entered into line 13 if nothing was sold?

Technically, there was a sale. See the second source of income below. There can be two sources of capital gains for a mutual fund shareholder:

  • The first source is a gain from a sale (generally, initiated by you).
  • The second source is a gain from a distribution. Capital gains are realized by the fund when a portfolio manager sells a security for more than he/she paid for it. The taxable consequence of that gain is passed through to the shareholders proportionately, according to the number of shares they own on the capital gain distribution record date. These amounts are reported on Form 1099-DIV. (Short-term capital gains are included in Box 1a of Form 1099-DIV. Long-term capital gains are identified as such on Form 1099-DIV, Box 2a.)


To enter your 1099-DIV, choose which version of TurboTax you are working on, for detailed steps.

 

TurboTax Online Instructions

Detailed Instructions:

  1. With your tax return open, search for 1099-DIV or 1099DIV (lower-case works also) and then click or tap the "Jump to" link in your search results.
  2. Answer Yes to Did you receive any dividend income?
  3. Choose your bank or brokerage from the list to import your 1099-DIV and click/tap Continue or manually enter your 1099-DIV  by clicking/tapping I'll type it in myself.
  4. Follow the on screen instructions to enter your 1099-DIV.

Don't combine the amounts from 2 or more 1099-DIV forms if they're from the same payer. Instead, enter additional 1099-DIVs individually by answering Yes to Do you have any more dividend income from somewhere else which appears a few screens down the road.

If you are entering a second 1099-DIV, simply click/tap on Add Another Broker or Payer and follow the same steps above.

TurboTax CD/Download Instructions

Detailed Instructions:

  1. With your tax return open, search for 1099-DIV or 1099DIV (lower-case works also) and then click the "Jump to" link in your search results.
  2. Answer Yes to Did you receive any dividend income?
  3. You will have the option to import your 1099-DIV or Type it in yourself.  Choose which option works best for you under How do you want to enter your 1099-div into your return? and click Continue.
  4. Follow the on screen instructions to enter your 1099-DIV.

If you are entering a second 1099-DIV, simply click on Add Another Broker or Payer and follow the same steps above.

View solution in original post

1 Reply
HelenaC
New Member

Why is capital gains entered into line 13 if nothing was sold?

Technically, there was a sale. See the second source of income below. There can be two sources of capital gains for a mutual fund shareholder:

  • The first source is a gain from a sale (generally, initiated by you).
  • The second source is a gain from a distribution. Capital gains are realized by the fund when a portfolio manager sells a security for more than he/she paid for it. The taxable consequence of that gain is passed through to the shareholders proportionately, according to the number of shares they own on the capital gain distribution record date. These amounts are reported on Form 1099-DIV. (Short-term capital gains are included in Box 1a of Form 1099-DIV. Long-term capital gains are identified as such on Form 1099-DIV, Box 2a.)


To enter your 1099-DIV, choose which version of TurboTax you are working on, for detailed steps.

 

TurboTax Online Instructions

Detailed Instructions:

  1. With your tax return open, search for 1099-DIV or 1099DIV (lower-case works also) and then click or tap the "Jump to" link in your search results.
  2. Answer Yes to Did you receive any dividend income?
  3. Choose your bank or brokerage from the list to import your 1099-DIV and click/tap Continue or manually enter your 1099-DIV  by clicking/tapping I'll type it in myself.
  4. Follow the on screen instructions to enter your 1099-DIV.

Don't combine the amounts from 2 or more 1099-DIV forms if they're from the same payer. Instead, enter additional 1099-DIVs individually by answering Yes to Do you have any more dividend income from somewhere else which appears a few screens down the road.

If you are entering a second 1099-DIV, simply click/tap on Add Another Broker or Payer and follow the same steps above.

TurboTax CD/Download Instructions

Detailed Instructions:

  1. With your tax return open, search for 1099-DIV or 1099DIV (lower-case works also) and then click the "Jump to" link in your search results.
  2. Answer Yes to Did you receive any dividend income?
  3. You will have the option to import your 1099-DIV or Type it in yourself.  Choose which option works best for you under How do you want to enter your 1099-div into your return? and click Continue.
  4. Follow the on screen instructions to enter your 1099-DIV.

If you are entering a second 1099-DIV, simply click on Add Another Broker or Payer and follow the same steps above.

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