Should I be paying taxes on "unrealized" capital gains (stocks and mutual funds that I have not yet sold)? it appears that I am. thanks - Chris

Forum|Forum|4 years ago
April 18, 2022
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JohnB5677

No, you should not be taxed on unrealized gains. They will be taxed when the investment is sold.

Both gains and losses can be divided into realized and unrealized. Investors realize a gain or a loss when they sell an asset.

Unrealized gains and losses reflect changes in the value of an investment before it is sold.

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davidd100-Author

thank you! that's what I thought, but somehow when I put in my 1099-DIV's it's increasing my tax burden based on the capital gain distributions. Is there a box I'm supposed to check to show that I haven't sold them and that they are unrealized?

RaifH

No, capital gains distributions are taxable and kind of the exception to the rule. If you own shares in a Regulated Investment Company (RIC), such as an ETF or mutual fund or a Real Estate Investment Trust (REIT) and they make stock sales that trigger capital gains, they report that as income to the shareholders, even if you do not sell any shares of the REIC or RIT.

For more information, see the IRS's tax topic on this topic.