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Posted by R. C. White on March 4, 2007, 10:30 pm
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Hi, Steve.
We have to be careful not to confuse money market ACCOUNTS with money market
FUNDS.
Banks offer MMAs, which are simply interest-bearing checking accounts, with
the interest rate fluctuating by reference to the money market. Earnings
from MMAs are interest, and are reported as such on the 1099-INT.
MMFs are a special type of mutual funds, with the price held at $1. The
fund manager invests the accumulated deposits into very short-term money
market instruments, collecting interest and making gains (we hope) on sales
of those assets. Each day the fund manager determines how much profit was
made that day, then declares a dividend of that amount - payable in stock at
$1 per share, not in cash. Each fund shareholder's dividends are reported
as dividends on the 1099-DIV.
Andrew's question related to shares of a money market fund. He may also
earn interest on uninvested cash in his account. But those are two
different kinds of income and are reported separately.
RC
--
R. C. White, CPA
San Marcos, TX
(Retired. No longer licensed to practice public accounting.)
rc@grandecom.net
Microsoft Windows MVP
(Currently running Vista Ultimate x64)
You will owe taxes on the interest you get on the money market. Your broker
will send you a 1099-INT for this purpose.
I started some non-retirement investing this year. At the brokerage you put
money into the account and "money market" shares are purchased at a straight
$1 = 1 share rate. Later, when you actually invest in something, a mutual
fund or stock, shares of this money market are sold and your mutual fund or
stock is purchased.
Importing to TurboTax for the Web creates an Investment Sales Summary for
the sales of these money market shares. Do I need to pay taxes on this?!?
--
Andrew DeFaria
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