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I was wondering about the differences between 1099-DIV and 1099-B forms.

In the case of mutual funds,

  1. Is 1099-DIV for reporting investment income due to trading of the securities in a mutual fund, instead of trading of the fund shares by the shareholder?
  2. Is 1099-B for reporting investment income due to trading of the fund shares by the shareholder, instead of trading of the securities in a mutual fund?
  3. Why do we have to separately report different types of investment incomes in 1099-DIV and in 1099-B forms? Is it because they are subject to different ways of calculating taxes?
  4. Within 1099-DIV, if I understand correctly, short term capital gain is reported as part of dividend, separately from long term capital gain. Does it mean dividend is taxed at a higher rate than long term capital gain?

Thanks and regards!

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  1. 1099-DIV is for the mutual fund to tell you (and the IRS) what dividends and capital gains distributions it is paying you, the shareholder, as a result of its trading of securities and receipt of dividends from stocks. You do not report anything on Form 1099-DIV, you transfer the information on the 1099-DIV that you receive to various places on your tax return.

  2. 1099-B is for the mutual fund to report to you (and the IRS) that you sold some shares in the mutual fund, how much money you received as a result of the sale, and the total cost of the shares. Again, you transcribe the numbers to various places on your tax return, but do not yourself report anything to anybody using 1099-B.

  3. (a) Because that is what the instructions from IRS say. (b) Yes.

  4. Usually, yes. But there are murky things like Qualified Dividends etc that complicate the answer and require weasel words such as "usually" and "it depends"

protected by Chris W. Rea Mar 22 '17 at 20:04

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