Question

capital gains

Forum|Forum|4 years ago
March 13, 2022
2 replies
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I had some short term and some long term capital gains last year. I also had some cap gain distributions in my after tax accounts. The turbo tax program added all three together as income to be taxed. I thought the short and long term gains would be counted as income and taxed appropriately. Since this was in my after tax account, why would the distributions be taxed as income?

Tax Advice

ColeenD3

Amounts in an IRA are tax deferred. If this was outside a retirement account, all capital gains are taxed.

M

Mike9241

capital gain distributions are long-term capital gains generated by the fund from the internal sale of stocks it holds. by law, these gains must be passed out to the fundholders if a fund sells shares held short term at a gain they come out not as short term capital gains but as ordinary dividends. if a fund has net capital losses for the year the fundholder gets no tax benefit. those losses are carried over until such time as the fund has capital gains in excess of those losses.

in other words, funds must pass out the income (whether dividend, internet, capital gain or other income) they generate to the fundholders to keep their tax-exempt status.