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Re: Distribution into a Mutual Fund

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Posted by Mark on February 12, 2001 at 19:50:25:

In Reply to: Distribution into a Mutual Fund posted by Jim on February 12, 2001 at 12:39:11:

: All year, I faithfully entered all of my buys & sells, and was able to produce a great looking Schedule D thanks to your software.

: When my end-of-year statement arrived from Ameritrade, it listed a capital gain on a Mutual Fund that I hadn't even sold yet. They said the money was given to me in the form of approx 100 additional shares back in November. I went back and checked my statement and found they were right, I just missed it that month.

: So I went into Fund Manager, and added 100 extra shares using the "Distribution" command, and "short-term" as the type. I also made sure the transaction date was set for November 2000.

: I'm a newbie when it comes to funds, so here is my question.....Why doesn't it show up as a capital gain when I re-run my Capital Gains report for 2000?

Hi Jim,
This is a short term capital gain type of "distribution". You do have to
report these distributions on your tax form, and pay taxes on them.
(Caveat: I'm not a tax advisor, consult your tax professional) When you
actually sell shares, is when you will see a capital gain entry show up
on the capital gain reports. You did not sell any shares, your mutual fund
company did, and created a distribution, which you must pay taxes on.

When you receive a distribution from your fund you must pay taxes on that.
If you reinvest this distribution (which is what sounds like you did this
time) your cost basis will increase by the amount of the distribution
for shares you sell in the future.

You end up paying taxes on the same total gains, but it just changes
when you pay the taxes.

Mark Beiley

Fund Manager for Windows 3.1x/95/98/NT

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