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#5
10-31-2004, 01:37 PM
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 Re: Bond fund distributions... dividends or interest? lambeth65[at]earthlink.net (E.L. Lambert) wrote: - quote - > When a taxable bond mutual fund makes a distribution and
Although reported as a dividend, it is taxed as ordinary> calls it an "Income Dividend," this is presumably from > interest payments on the underlying bonds in the fund. > So then, is this distribution considered a dividend, and > subject to the lower tax rate applicable to dividends... or > is it considered an interest payment, taxable at your > (generally higher) marginal rate? income (that is, just as if it were interest). - quote - > I've been holding my bond funds in my IRA and my stock funds
No, you're doing it right. There's no tax advantage in bond> in my taxable account, on the theory that if I have to pay > taxes on something, I'd rather pay it on dividends than on > interest... but if holding the bonds in a mutual fund > rather than directly means that the distributions are > "dividends", I've been going about this all wrong!! fund dividends. -- Chris Green << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#4
10-31-2004, 01:18 PM
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| Re: Bond fund distributions... dividends or interest? - quote - > When a taxable bond mutual fund makes a distribution and
The distribution is a dividend, but it is not a "qualifing"> calls it an "Income Dividend," this is presumably from > interest payments on the underlying bonds in the fund. > So then, is this distribution considered a dividend, and > subject to the lower tax rate applicable to dividends... or > is it considered an interest payment, taxable at your > (generally higher) marginal rate? dividend. It doesn't get the lower tax rate. See lines 9a and 9b on the 1040, and line 23 on the back of Schedule D. -- Don EA in Upstate NY << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#3
10-31-2004, 01:18 PM
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| Re: Bond fund distributions... dividends or interest? lambeth65[at]earthlink.net (E.L. Lambert) wrote: - quote - > When a taxable bond mutual fund makes a distribution and
It really doesn't matter whether you call it a dividend or> calls it an "Income Dividend," this is presumably from > interest payments on the underlying bonds in the fund. > So then, is this distribution considered a dividend, and > subject to the lower tax rate applicable to dividends... or > is it considered an interest payment, taxable at your > (generally higher) marginal rate? interest, as bond mutual fund dividends are generally NOT "qualified" for a lower tax rate. They are taxed the same as interest payments. - quote - > I've been holding my bond funds in my IRA and my stock funds
All distributions from your IRA account are going to be> in my taxable account, on the theory that if I have to pay > taxes on something, I'd rather pay it on dividends than on > interest... but if holding the bonds in a mutual fund > rather than directly means that the distributions are > "dividends", I've been going about this all wrong!! taxed at ordinary tax rates, whether you call them interest or dividends. Distributions from stocks in your taxable fund are generally dividends or capital gains distributions. The dividends may or may not be qualified, depending on the underlying stocks in the fund. The fund manager will tell you how much is qualified (subject to lower capital gain rates) at the end of the year. - quote - > P.S. I recognize that a small amount of bond fund
<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->
> distributions may also be ST or LT capital gains, and I am > not asking about that component. |
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#2
10-28-2004, 12:41 AM
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| Re: Bond fund distributions... dividends or interest? - quote - > When a taxable bond mutual fund makes a distribution and
If you have a question about what your mutual fund> calls it an "Income Dividend," this is presumably from > interest payments on the underlying bonds in the fund. > So then, is this distribution considered a dividend, and > subject to the lower tax rate applicable to dividends... or > is it considered an interest payment, taxable at your > (generally higher) marginal rate? > I've been holding my bond funds in my IRA and my stock funds > in my taxable account, on the theory that if I have to pay > taxes on something, I'd rather pay it on dividends than on > interest... but if holding the bonds in a mutual fund > rather than directly means that the distributions are > "dividends", I've been going about this all wrong!! > P.S. I recognize that a small amount of bond fund > distributions may also be ST or LT capital gains, and I am > not asking about that component. distribution consists of, you should consult the mutual fund. -- David M. Woods, EA, ChFC, CLU Woods Financial Services Norwood, MA 02062 www.woods-financial.com << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#1
10-28-2004, 12:21 AM
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| Re: Bond fund distributions... dividends or interest? lambeth65[at]earthlink.net (E.L. Lambert) writes: - quote - > When a taxable bond mutual fund makes a distribution and
Yes.> calls it an "Income Dividend," this is presumably from > interest payments on the underlying bonds in the fund. - quote - > So then, is this distribution considered a dividend, and
Yes.- quote - > subject to the lower tax rate applicable to dividends...
No.The law does NOT say that dividends in general get the lower rate. It says that QUALIFIED dividends get the lower rate. Dividends from bond funds allocable to portfolio interest are not qualified. This is a big oversimplification, but dividends must be from (or allocable to dividends from, if you're talking about a mutual fund) a C corp that paid a dividend (subject to various restrictions on the size of the dividend, how it relates to income and retained earnings, etc.). -- Rich Carreiro rlcarr[at]animato.arlington.ma.us << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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10-28-2004, 12:02 AM
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| Re: Bond fund distributions... dividends or interest? L. Lambert wrote: - quote - > When a taxable bond mutual fund makes a distribution and
It's a nonqualified dividend. You do not include it on Line> calls it an "Income Dividend," this is presumably from > interest payments on the underlying bonds in the fund. > So then, is this distribution considered a dividend, and > subject to the lower tax rate applicable to dividends... or > is it considered an interest payment, taxable at your > (generally higher) marginal rate? > I've been holding my bond funds in my IRA and my stock funds > in my taxable account, on the theory that if I have to pay > taxes on something, I'd rather pay it on dividends than on > interest... but if holding the bonds in a mutual fund > rather than directly means that the distributions are > "dividends", I've been going about this all wrong!! > P.S. I recognize that a small amount of bond fund > distributions may also be ST or LT capital gains, and I am > not asking about that component. 9b "Qualified Dividends". Effectively, it is taxed just like interest income. -- Alan http://taxtopics.net << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#-1
10-26-2004, 10:16 PM
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| Bond fund distributions... dividends or interest? When a taxable bond mutual fund makes a distribution and calls it an "Income Dividend," this is presumably from interest payments on the underlying bonds in the fund. So then, is this distribution considered a dividend, and subject to the lower tax rate applicable to dividends... or is it considered an interest payment, taxable at your (generally higher) marginal rate? I've been holding my bond funds in my IRA and my stock funds in my taxable account, on the theory that if I have to pay taxes on something, I'd rather pay it on dividends than on interest... but if holding the bonds in a mutual fund rather than directly means that the distributions are "dividends", I've been going about this all wrong!! P.S. I recognize that a small amount of bond fund distributions may also be ST or LT capital gains, and I am not asking about that component. << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
| Tags |
| bond, distributions, dividends, fund, interest |
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