Undistributed Capital Gains
A mutual fund usually distributes all its capital gains to its shareholders. The mutual fund company reports these gains on Form 1099-DIV. However, a mutual fund might keep some of its capital gains and pay a tax on them. When this happens, the mutual fund company will send you a Form 2439: Notice to Shareholders of Undistributed Long-Term Capital Gains.
Report these capital gains even though you don't actually receive them. However, since the mutual fund paid tax on the gains, you can claim a credit for the taxes they pay.
You also need to increase the basis of your mutual fund shares by the difference between these two items:
- Amount of undistributed capital gains you report
- Amount of taxes reported to you as paid
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So how much will you get (or owe) this year? That’s the million-dollar question. We happen to have three very useful calculators to help you estimate your refund or balance due.