Capital Gain Distributions
Capital gain distributions come from mutual funds and real estate investment trusts (REITs). These distributions are treated as long-term capital gains, regardless of how long the taxpayer holds the shares. Capital gain distributions are reported to the taxpayer on Form 1099-DIV, box 2a. The taxpayer reports these distributions as long-term capital gains on Form 1040, line 13, and on Schedule D if required.
Ordinary dividends are corporate distributions paid in cash. They come from a corporation's net earnings and profits.
Mutual funds are regulated investment companies.
Capital gains realized by the taxpayer due to the sale of stock or mutual fund shares are detailed in the Advanced course.
Olivia held both common stock and preferred stock in several U.S. corporations. Several of them paid dividends during the tax year. The following January, she received Forms 1099-DIV listing these as ordinary dividends.
Olivia also owned shares in a mutual fund and in a real estate investment trust. Both made capital gain distributions that year. The following January, she received Forms 1099-DIV listing these capital gain distributions.