LT Capital Gains for Mutual Funds

[michasiegel91]

How is the holding period calculated for Mutual Funds? Is it based on when I purchased the mutual fund or when the fund manager purchases individual shares for the fund? Also are Index funds calculated the same or is there a difference?

[TomD8]

You own shares in the mutual fund.  Your holding period is based on when you buy and sell those shares.

The mutual fund itself owns a variety of investments.  The mutual fund's holding period is based on when the fund managers buy and sell those shares within the fund.  Any capital gains are distributed to the mutual fund's shareholders, and are reported to the shareholders at year's end on Form 1099-DIV.

[tagteam]

Also, you report capital gain distributions as long-term capital gains, regardless of how long you owned your shares in the mutual fund.

See https://www.irs.gov/publications/p550#en_US_2018_publink100010088

[michasiegel91]

Thanks! To clarify, if I sell the shares it will be reported on a 1099-B, and the holding period is based on how long I held them, and if the investments are sold within the fund by the manager those are all capital gain distributions and reported on 1099-DIV every year?

[tagteam · Accepted solution]

Put it this way:

Any net short-term capital gains distributed to you from mutual funds are reported as ordinary dividends on Form 1099-DIV; these gains are from securities the mutual fund has held for one year or less.

Any long-term capital gains distributed to you from mutual funds are reported as capital gains distributions on Form 1099-DIV; these are gains from securities the mutual has held for more than one year and are essentially long-term to you regardless of how long you have held shares in the mutual fund.

[TomD8]

Bottom line: if you correctly enter your 1099-B and your 1099-DIV into the program, TT will calculate any taxes due and will report the information properly on your tax return. 

[RyanPC]

I just started using investments last year via mutual funds and was wondering if I have to report it on my taxes? I got forms in the mail but it’s really confusing to put the info in? Do you only report if you sold anything right? It’s a short term gain and I did make a capital gain it was below 1500 so do I even qualify. 2 I already filed without putting it down, in my case what do I do? I don’t want any penalties or anything in that nature just over this. Do I have to amend? 

[CatinaT1]

If you filed, it is like dropping it into a mailbox - you cannot get it back.

You'll have to wait until your return is either accepted or rejected.

• If rejected, you can make any necessary changes.
• If accepted, you'll need to amend your return. 
• To avoid unnecessary delays, do not amend until your original return has been fully processed.  You will need to print and mail the amendment.  
• Allow 8-12 weeks for processing.

See this TurboTax FAQ for help with amending.

You can check the status of your amended return here, but allow 3 weeks after filing for it to show up.

[RyanPC]

It got accepted so after 3 weeks just amend it? Also can you help me add in the info? It’s really confusing. My first year doing this for investments. Also I still didn’t receive my stimulus and filed my 2019 one few day ago a should I wait or amend my 2018 one because I clicked the wrong answer as being claimed as a dependent however my parents never claimed me so will they catch that in the system? Thanks for you help. @CatinaT1