Capital Gains
Franklin Templeton provides estimated capital gain distribution information for many funds prior to the fund's record date. Final capital gains distribution amounts are available on a fund's ex-dividend date.
All mutual funds, regardless of performance, must distribute to shareholders any net realized gains from the sale of individual securities in their portfolios.
- To receive the distribution, you must have been a registered shareholder of the fund on the record date.
- Distributions are paid to shareholders on the payment date.
- Distributions will vary depending on the fund's income and any gains realized from the sale of securities in the funds' portfolio.
- Past distributions are not indicative of future distribution trends.
For tax information about a specific fund, including final year-end capital gain distributions, use our fund search.
The ABCs of capital gains
Capital gains and losses are generated when securities are sold. Generally, when a security is sold for more than the price at which it was purchased, a capital gain results. When a security is sold for less than its purchase price, a capital loss results.
The length of time an investor or mutual fund owned a security generally determines the rate at which the capital gain will be taxed. Securities (including mutual fund shares) held for 1 year or less are considered short-term investments (and are generally taxed at ordinary income tax rates), while those held for more than 1 year are considered long-term investments.
Net short-term capital gains earned by a fund are generally distributed as Ordinary Dividends for tax purposes and are reported to individual shareholders on Form 1099-DIV, box 1a. Short-term capital gain distributions paid by a fund cannot be used to offset capital losses on Form 1040, Schedule D.
The top individual tax rate on long-term capital gains is 15%. For taxpayers in the 10% and 15% federal income tax brackets, the capital gains tax rate is 0%. These tax rates apply for both regular tax and alternative minimum tax purposes.
An individual can use a net capital loss to offset other income. If an individual realizes a net capital loss for the year, this loss can be used to offset up to $3,000 of other income. Unused capital losses may be carried over to offset gains in future years.
Mutual fund shareholders can earn capital gains and losses by:
- Selling or redeeming fund shares, or
- Receiving capital gain distributions from a fund
Additional information on how to report gains and losses, including determining the tax basis you have in your mutual fund shares, can be obtained by reading IRS Publications 544, Sales and other Dispositions of Assets, and 551, Basis of Assets. These publications can be downloaded from the IRS website.
Important Legal Information
Nothing in this online Tax Center is intended or written to be used by the investor, or can be used by the investor, for the purpose of avoiding any income tax penalities that may be imposed on the investor under the Internal Revenue Code. Investors should seek advice from their financial or tax advisors about the tax consequences of their investments or potential investments based on their particular financial circumstances.
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