For sales after 5/5/03 and before 2009, the 5% rate applies (). Mutual fund stock gains otherwise taxable at a 20% rate after 2008 will be taxed at 18%, if the stock was acquired or treated as acquired after 2000 and held more than 5 years.Stock whose ownership began before 2001 is treated as if acquired after 2000 if the taxpayer so elected.Tax on the gain is ,500, which is composed of 0 (5% of that part of the gain within the spread from their taxable income to where the 25% bracket begins) plus ,250, which is 15% of the balance of the gain.
How are capital gains on sales of mutual funds determined?Tip #1: Keep Track of Reinvested Dividends Tip #2: Be Aware That Exchanges of Shares Are Taxable Events Tip #3: Be Wary of Buying Shares Just Before Ex-Dividend Date Tip #4: Do Not Overlook the Advantages of Tax-Exempt Funds Tip #5: Keep Records of Your Mutual Fund Transactions Tip #6: Re-investing Dividends & Capital Gain Distributions when Calculating Tip #7: Adjust Cost Basis for Non-Taxable Distributions Tip #8: Use the Best Method of Identifying Sold Shares Tip #9: Avoid Backup Withholding Tip #10: Don't Forget State Taxation Tip #11: Don't Overlook Possible Tax Credits For Foreign Income Tip #12: Be Careful About Trying the "Wash Sale" Rule Tip #13: Choose Tax-Efficient Funds INFOSOURCES A basic knowledge of mutual fund taxation and careful record-keeping can help you cut the tax bite on your mutual fund investments.You must generally report as income any mutual fund distributions, whether or not they are reinvested.Qualified dividends are, with certain exceptions, dividends received from domestic and foreign corporations after 2002 and before 2009even including dividends received in 2003 before the 2003 Act was enacted (late May). Dividends from mutual funds qualify where a mutual fund is receiving qualified dividends and distributing the required proportions thereof. When gains from the fund's sales of securities exceed losses, they are distributed to shareholders.Dividends from foreign corporations are qualified where their stock or ADRs are traded on U. exchanges or with IRS approval where the dividends are covered by U. As with ordinary dividends, these capital gain distributions vary in amount from year to year.