RE: Canadian mutual fund distributions

kap0 · Post by **kap0** » Mon Apr 25, 2005 5:07 pm

Now that I have filed my 1040 return in U.S., I have some
doubt as to whether I have filed my return correctly.
This has to do with distributions from Canadian mutual funds
I have held for many years prior to moving from Canada to
the States.
For one fund, I have received dividend distribution;
for another, capital gain distribution. I have not received
1099-DIV forms from either company; the type of distributions
are based on the statements I have received from the company,
plus talking directly with their client service department.

Q1: For the dividend distribution, I have claimed ordinary
dividend, plus qualified dividend.
I am wondering if claiming qualified dividend is correct?
Based on my reading of IRS description for qualified dividend,
I think I have met all 3 requirements. Can anybody offer
an opinion as how they would file for similar situation?

Q2: For capital gain distribution, I have claimed long term
capital gain. Somewhere in the IRS document, I have read that
capital gains distribution from mutual fund company will be
treated as long-term capital gain. Again, any opinion?

Thanks.

nelsona · Post by **nelsona** » Tue Apr 26, 2005 11:42 am

IRS Publication 564 is for you:

On capital gains distributions:

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Capital gain distributions are taxed as long-term capital gains regardless of how long you have owned the shares in the mutual fund. <hr height="1" noshade id="quote"></blockquote id="quote">

As to dividends being qualified or not, I do not see how you, without getting clear direction from the mutaul fund company could possibly know if the dividends are qualified or not. You would need to know what holdings paid dividends, and then for how long the fund held those investements.

Barring precise infor from the mutual fund, you should be treating these dividends as non-qualified, or be prepared to pay extra tax if questioned.

nelsona non grata... and non pro

kap0 · Post by **kap0** » Tue Apr 26, 2005 2:05 pm

Thanks for confirming that it is long term capital gains.

As for qualified dividend, the reason I am in doubt is
with respect to the holding period requirement.
You are right that I need specific information from the
mutual fund company as to which stocks in their portfolio
are responsible for the dividend, and then I need to find
out if those specific stocks meet the 60 days holding time
during the 121-day period that begins 60 days before the
ex-dividend date. Since that mutual fund company is known
for its policy of buy-and-hold, the chances of their
stocks meeting the modest holding time requirement is
quite good. Given the benefit of paying less tax (15% max.)
versus 28% or higher, I will try to get from the mutual fund
company those specific details.

A follow-up question:
Since I have already claimed qualified dividend, and assuming
I will get positive proofs from the mutual fund company, do
I need to send those supporting documents to IRS ASAP, or do
I wait for IRS to question my claim, and then provide the
proofs at that time?

Thanks.

nelsona · Post by **nelsona** » Tue Apr 26, 2005 2:26 pm

Since proof was not required when submitting the return, on what basis would you now send such proof? Save whatever you get for IRS.

Good luck getting those details. Unless your holdings are six-figures, I wouldn't hold my breath for a response.

And can I suggest that you stop hitting the return key in your posts, the words will wrap automatically.

nelsona non grata... and non pro