Some mutual funds retain their long-term capital gains and pay capital gains tax on those amounts. Even though not actually received by you, you include as a capital gain distribution on your return the amount of the undistributed capital gain allocated to you by the fund. If the mutual fund paid a tax on the undistributed capital gain, you are entitled to a tax credit.
|Type of Distribution||Shown by the Fund in||How To Report|
|Ordinary dividends and short-term capital gain distributions.||Box 1a, Form 1099-DIV||Box 1a of Form 1099-DIV shows taxable ordinary dividends. The total includes ordinary dividends and short-term capital gain distributions, which are taxed as ordinary income, and also qualified dividends, if any, which are taxable at the 15% or 0% capital gain rate. The Box 1a total must be entered on Line 9a of Form 1040 or 1040A. If your total ordinary dividends from all sources exceed $1,500 or if you received as a nominee ordinary dividends on behalf of another taxpayer, you must itemize the ordinary ...|