| |
|
The Basics |
|
How Do Funds Trigger Taxable Events?
|
Funds make income and/or capital gain distributions
to shareholders on a per share basis. Money market and bond funds typically pay dividends monthly,
and sometimes quarterly. To meet certain federal tax law requirements, applicable to funds, at year-end funds must distribute
the substantial majority of their previously unpaid income and/or capital gain distributions that reflect all previously unpaid
amounts earned by the fund over the year.
Income distributions are made from all interest and dividend
income on portfolio holdings. Monthly dividends may or may not be taxable (e.g., monthly
dividends from a municipal bond fund are usually not federally taxable). Year-end income
distributions (these may include short-term capital gains) are taxable to the investor at
applicable federal and state income tax rates.
Capital gain distributions are made from net profits from
the sale of portfolio securities. Capital gain distributions are of two types (short and long term), and are taxable to
the investor at his or her applicable income or capital gains tax rate, depending on the circumstances.
Next:
Taxable Events You May Be Able To Control
This information is general in nature and is not intended to constitute tax advice. Always consult your tax advisor for more detailed information on tax issues and advice on your specific situation.
Investors should consider the investment objectives, risks, charges, and expenses of a fund carefully before investing. Download a prospectus that contains this and other information about a fund, and read it carefully before investing.
|
