15% capital gains distributions

[rbrookefox]

I received capital gains distributions from mutual funds which were characterized by the brokerage as 15% capital gains. The brokerage is not privy to my tax returns so how does it know that these are 15%  capital gains, the rate of which as I understand it depends on my tax rates as affected by all of my investments, not just those from this particular brokerage?

[Critter-3]

Good question ... maybe you need to ask them.  Maybe they are basing it off the personal info they have on file for you which shows your income level.   Maybe it is just a guess ?

[fanfare]

It probably means your distribution is 15% capital gains and 85% dividends.

@rbrookefox 

[rbrookefox]

@fanfare Thank you, but I think not. Divs are shown on a separate line.

[Hal_Al]

I suspect the broker is just using that term ("15% capital gains") to let you know that Capital Gains distributions are taxed  the same  as long term capital gains.  For most people that works out to  mostly15%. 

[rbrookefox]

@Hal_Al Well, thanks, but that seems pretty casual given how wildly (my) income changes. 

Does it even matter if TT just treats them all as long term cap gains and then makes the rate calculation based on the rest of the reported cap gains?

[rbrookefox]

Well, 'most people' is a bit casual and not allowed in taxes and bean counting generally.... but you may be right.

[Hal_Al]

Q.  Does it even matter if TT just treats them all as long term cap gains and then makes the rate calculation based on the rest of the reported cap gains?

A. No.

TT uses the IRS "Qualified Dividends & Capital Gains" worksheet* to calculate the tax on Long term capital gains, capital gains distributions and Qualified dividends.  On that worksheet, the qualified income will be totaled and the total allocated to the 0%, 15% or 20% rates, as needed. 

*In some cases a "Schedule D worksheet" will be used instead. 

[fanfare]

your 1099-DIV from a mutual fund will show the part of your capital gains distribution that is LT capital gains as capital gains, and  will show the part that is ST capital gains as dividends, so you can report on the correct line.

@rbrookefox 

[Mike9241]

@rbrookefox only the broker can give the correct answer. but a mutual fund can make one distribution that is 15% capital gain and 85% dividends. where they get reported on your tax return is irrelevant. 

I got such a distribution from a mutual fund I own. part Long-Term Capital Gain, part Short-Term Capital Gain (which will be included with dividends on the 1099) and part dividends. 

[rbrookefox]

@fanfare They show cap gain distributions as either unrecap 1250, section 1202, 28% rate, section 897, or 15% rate, hence the OP.

[rbrookefox]

@Mike9241 "where they get reported on your tax return is irrelevant." Huh?

[rbrookefox]

I'm guessing it is a Fidelity reporting "feature" because I do not see it on other brokerage distribution statements. This is odd as it adds needless confusion and may be incorrect info anyway!

[fanfare]

you have to refer to your official 1099-DIV which will be sent in February.

@rbrookefox 

[rbrookefox]

@fanfare While that may be true for filing final returns, the information is posted for purposes of tax loss harvesting prior to years end.