SIE: Mutual Fund Distributions

Mutual Fund Distributions

Mutual fund companies do not pay taxes as long as they pass on their income and capital gains to the shareholders of the fund. Shareholders have to pay taxes on the income earned from any dividends paid from securities and any interest earned on bonds within the fund. Also, shareholders must pay taxes on any capital gains distributions incurred when their funds sold stocks or bonds at a profit.

• • Interest on bonds is taxed at the investor’s ordinary income rate.
• • Dividends are taxed at either the qualified rate or the investor’s ordinary income rate, depending on the dividend.
• • Capital gains distributions are