Tax Information

Valuable tax information for Libra6 funds as you prepare your federal and state income tax returns.

Tax Information FAQs:

What is a capital gain?
A capital gain is a profit that results from a sale of a capital asset, such as stock, bond or real estate, where the sale price exceeds the purchase price. The gain is the difference between a higher selling price and a lower purchase price. Conversely, a capital loss arises if the proceeds from the sale of a capital asset are less than the purchase price. Capital gains may refer to "investment income" that arises in relation to real assets, such as property; financial assets, such as shares/stocks or bonds; and intangible assets.

What is the difference between short-term and long-term capital gains?
Short-term capital gains result from the sale of an investment held for less than a year. A distribution of short-term gains by a mutual fund is taxed as ordinary income. Long-term capital gains result from the sale of an investment held for more than a year. A distribution of long-term gains by a mutual fund is taxed at the investor's capital gains tax rate

When are taxes paid on capital gains distributions?
Investors are required to include these amounts on their federal income tax return for the year when they are received. Visit: www.irs.gov and consult your Tax Advisor

What is a cost basis?
The original value of an asset for tax purposes (usually the purchase price), adjusted for stock splits, dividends and return of capital distributions. This value is used to determine the capital gain, which is equal to the difference between the asset's cost basis and the current market value.
Using the correct tax basis is important especially if you reinvested dividends and capital gains distributions instead of taking the earnings in cash. Reinvesting distributions increases the tax basis of your investment, which you must account for in order to report a lower capital gain (and therefore pay less tax). If you don't use the higher tax basis, you could end up paying taxes twice on the reinvested distributions. Visit: www.irs.gov and consult your Tax Advisor

If distributions are reinvested, are they still subject to taxes?
Yes, fund distributions are considered taxable income, and shareholders must pay taxes on their gains even if they reinvest them into the mutual fund for more shares.

When is a Form 1099 sent to shareholders?
A Form 1099-DIV is sent to shareholders by investment fund companies to provide a record of all taxable capital gains and dividends paid, including those that have been re-invested in a given tax year. Tax Form 1099-B will also be sent if a shareholder has redeemed shares from their fund. Form 1099-INT is sent to shareholders who have received dividend distributions on municipal bond funds.

blog_tags: