Tax software doesn't compute
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 Dear
Tax Talk,
I had a stock sell and incurred a long-term loss of over $100,000 (company went bankrupt). Also in the same year (2006) my mutual fund produced $5,000 in capital gain distributions. My understanding is that I should be able to shield the $5,000 in capital gain distributions and take a $3,000 loss. The $92,000 balance would carry to next year. Is this correct? I'm asking since my tax software doesn't seem to be offsetting the capital gain distributions from the mutual fund.
-- Greg
Dear Greg,
You're right. Your software is not.
Mutual fund capital gain distributions generally represent the amount of long-term
capital gains and losses on stock trades by the fund. Since the fund does not
pay tax on these gains and losses, fund holders such as yourself report this income
on their tax returns.
If you received capital gain distributions,
you report them either directly on Form 1040, line 13 or on Schedule D, line 13,
depending on your situation. Report them on Schedule D, line 13, unless both of
the following are true.
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Report capital gain distribution on Schedule D unless: |
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| 1. |
The only amounts you would have to report on Schedule D are capital gain distributions from box 2a of Form 1099-DIV (or similar statement). |
| 2. |
You do not have an amount in box 2b, 2c, or 2d of any Form 1099-DIV (or similar statement). |
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Since you have
the capital loss from the sale of the bankrupt company, you will need to use Schedule
D. The capital gain distributions should flow through to line 13 of Schedule
D. Do not include capital gain distributions as dividend income on Form 1040
or Schedule B. If you can't get your software to cooperate and customer support
is no help, try another program. To ask a question on Tax
Talk, go to the "Ask the Experts"
page, and select "taxes" as the topic. |
