Sale of mutual fund, short-term capital loss form 1099-B, but where to find short-term capital loss on 1099-DIV

[bhc2000]

Hello, I intend to sell a mutual fund in Nov. 2021, (brought Feb. 2021) at a short-term capital loss.  I understand I should get a 1099-B from the broker for the sale.  Other mutual funds should report 1099-DIV, but columns 1b has only ordinary dividends (and no short-term capital gain).  How would I be able to offset the short-term gain with the short-term loss?  Many thanks for your kind help.

[VolvoGirl]

There is Capital Gains reported in box 2a.   Don't worry about it.   Just enter the 1099B and 1099-Div forms and Turbo Tax will calculate it.   But losses on sales won't offset Dividends.   They are on separate lines on the tax return.

[bhc2000]

Many thanks VolvoGirl.  But I also read short-term loss is supposed to be (can be) used to offset short-term gain first (at a higher tax rate) before used to offset long-term gain and then ordinary income (dividend).  Box 2a of 1099-DIV reports long-term gain.  So the short-term loss will be used to offset long-term gain?  Seems like short-term loss can be used to offset short-term gain only if both are reported on 1099-B?  Many thanks.

[VolvoGirl]

Yes you need to have short term gains from SALES.   

If you have a net loss for the year you can only deduct 3,000 (1,500 MFS) max on your tax return.  The rest you have to carryover to next year.  You have to report the carryover every year until it's used up.  You can't skip a year.  

See Publication 550.  Capital Losses start on page 66

https://www.irs.gov/pub/irs-pdf/p550.pdf

And here's Schedule D

https://www.irs.gov/pub/irs-pdf/f1040sd.pdf

[bhc2000]

I got it!  Many thanks VolvoGirl. 😀

[Critter-3]

Box 2A on a 1099-DIV reports cap gain passed thru from the mutual funds and are always considered long term and once entered on the 1099-DIV screen will pass thru to the Sch D and be netted against any cap losses you may have ... just enter the form info as  printed  and let the program do all the work for you.  Don't try to force it. 

[rjs]

Mutual fund distributions of short-term capital gain are reported as dividends. The short-term capital gains in the fund are included in the dividends in 1099-DIV box 1a and are treated as dividends on your tax return. They are not treated as capital gain.

[Mike9241]

under the tax laws, short-term capital gain dividends are treated as non-qualifying ordinary dividends and included om 1099-DIV line 1a. they do not get reported on form 8949/Schedule D. There is no such thing as a short-term capital loss dividend.    

[Critter-3]

After teaching income tax prep courses for several years AND as an EA   I can say with certainty that the cap gains reported on a 1099-DIV  are considered LONG TERM and are reported on the Sch D in the LONG TERM cap gains section line 13 ... if no Sch D is otherwise required then this amount is reported directly on the 1040 line 7 ...  there is no such thing as SHORT term cap gains reported  on a 1099-DIV ... they are simply non qualifying dividends.  That is why the total dividends paid out and the amount of those dividends that QUALIFY for special tax treatment can be different amounts ... not all of the dividends reported in box 1 are qualified for special tax treatment.  

[Hal_Al]

Q. Where to find short-term capital loss on 1099-DIV?

A. You don't find it on the 1099-Div.  Gains and or losses from the sale of mutual funds are not reported on the 1099-Div.  You will find that info on the 1099-B. Box 2a  (long term capital gain distributions) of the 1099-Div are  for the sales of stocks, within the mutual fund, not the gains for selling shares of the fund.

Q.  How would I be able to offset the short-term gain with the short-term loss? 

A. You're not allowed to offset your 1099-B losses directly against any short term gains included in box 1a of the 1099-DIV (gains on the sales of stocks within the fund).  Box 1a losses (if any) are treated as ordinary dividends, for tax purposes.  As such, there is only a lump sum in box 1a (no break down between short term gains and dividends).  For most cases, the difference between boxes 1a and 1b is probably short term capital gains; but that's irrelevant for your tax reporting purposes. 

Q.  Box 2a of 1099-DIV reports long-term gain.  So the short-term loss will be used to offset long-term gain? 

A.  Yes.  As others have explained, that happens on Schedule D.  TurboTax does that.  You simply enter the 1099-Div and the 1099-B. 

 

[Critter-3]

Mutual funds 101 ...

You will buy and sell mutual fund stock like any other stock ... sales are reported on a 1099-B.  You report the sales of the fund you bought in the year of sale. 

Mutual funds distribute  Dividends and Cap gain distributions on a 1099-DIV  from the INTERNAL happenings in the fund ... the dividends THEY earned and the sales THEY make inside the fund itself.  A mutual fund is invested in many different things and the 1099s at the end of the year report your portion of the activities inside the fund while you owed it.  

Dividends distributed by a mutual fund are reported on the 1099-DIV box 1a and if some of those dividends are qualified that amount is listed in box 1b for special tax treatment.

Mutual funds buy and sell WITHIN the mutual fund itself and if they have any CAPITAL GAINS at the end of the year that is distributed and reported on the 1099-DIV box 2a. 

Mutual funds  NEVER distribute capital LOSSES ... those are always retained by the fund and are used to negate capital GAINS within the fund itself ... then only net cap gains are distributed.   If at the end of the year there  are  only net cap losses then those are RETAINED by the fund to be used in future years.  

On the 1099-DIV there could be a host of other items reported in the other boxes ... see the instructions for those boxes on the back of the form or read up on the IRS site : https://www.irs.gov/forms-pubs/about-form-1099-div

If you do not understand how mutual funds work please contact your broker or fund manager for an explanation of these concepts/rules.