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Subject Author Date
Cap Gains limited to 15% where? Ron Hardin 06-03-2007
Posted by Ron Hardin on June 3, 2007, 10:29 pm
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 I'm trying to figure out what Turbo-tax did with a capital
gain distribution from a mutual fund, to understand it.

It gets copied onto line 13 (Capital gain or loss) with
>`sched D not required'' checked. (Turbotax picked up the
numbers online from the mutual fund itself.)

That puts it in the stream for taxation as ordinary income,
unless I'm missing something.

On the other hand, isn't it supposed to be taxed at 15% max?

Is there some following step that handles it?

I get no IRS forms or instructions thanks to e-filing the
previous year, so it's all reverse engineering.

The ultimate goal is to find out how Ohio taxes capital
gains, but I ran into this confusion first.

--
Ron Hardin
rhhardin@mindspring.com
On the internet, nobody knows you're a jerk.

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Posted by Ira Smilovitz on June 5, 2007, 3:19 pm
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> I'm trying to figure out what Turbo-tax did with a capital
> gain distribution from a mutual fund, to understand it.
>
> It gets copied onto line 13 (Capital gain or loss) with
> `sched D not required'' checked. (Turbotax picked up the
> numbers online from the mutual fund itself.)
>
> That puts it in the stream for taxation as ordinary income,
> unless I'm missing something.
>
> On the other hand, isn't it supposed to be taxed at 15% max?
>
> Is there some following step that handles it?
>
> I get no IRS forms or instructions thanks to e-filing the
> previous year, so it's all reverse engineering.
>
> The ultimate goal is to find out how Ohio taxes capital
> gains, but I ran into this confusion first.

The capital gains distributions are taxed at 15%. The
calculation is completed on a separate worksheet which feeds
to line 44 and is not included with the filed return.

I can't speak for OH, but most states tax capital gains at
the same rates as all other income.

Ira Smilovitz

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Bob Sandler on June 5, 2007, 3:19 pm
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> I'm trying to figure out what Turbo-tax did with a capital
> gain distribution from a mutual fund, to understand it.
>
> It gets copied onto line 13 (Capital gain or loss) with
> `sched D not required'' checked. (Turbotax picked up the
> numbers online from the mutual fund itself.)
>
> That puts it in the stream for taxation as ordinary income,
> unless I'm missing something.

You are missing something. All your income, of all types, is
added together on the first page of Form 1040. This has
nothing to do with the tax rate that is applied.

> On the other hand, isn't it supposed to be taxed at 15% max?
>
> Is there some following step that handles it?

Yes. The tax is calculated on a worksheet that applies the
appropriate rates to different types of income. Look at the
Tax Smart Worksheet in between lines 43 and 44 of Form 1040.
One box will be checked to indicate what method was used to
calculate your tax. You will probably find that it is the
Qualified Dividends and Capital Gain Tax Worksheet. If you
look at that worksheet you will see different rates being
applied to ordinary income and capital gains.

Bob Sandler

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Don Priebe on June 5, 2007, 3:19 pm
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> I'm trying to figure out what Turbo-tax did with a capital
> gain distribution from a mutual fund, to understand it.
>
> It gets copied onto line 13 (Capital gain or loss) with
> "sched D not required'' checked. (Turbotax picked up the
> numbers online from the mutual fund itself.)

That's correct if you had no actual stock sales that year
and no loss carryover.

> That puts it in the stream for taxation as ordinary income,
> unless I'm missing something.

Just wait ...

> On the other hand, isn't it supposed to be taxed at 15% max?

Yep.

> Is there some following step that handles it?

Yep. Go to line 43 (that's your taxable income). Look up
the tax on that amount by using the tax tables. Compare to
line 44. If line 44 is not equal to the amount in the tax
tables, then not all of your income was taxed as ordinary
income.

> I get no IRS forms or instructions thanks to e-filing the
> previous year, so it's all reverse engineering.

Sounds like you have some downloading to do! Look for the
capital gains worksheet on page 38 of the 1040 instructions.

--
Don EA in Upstate NY

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Herb Smith on June 5, 2007, 3:19 pm
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> I'm trying to figure out what Turbo-tax did with a capital
> gain distribution from a mutual fund, to understand it.

Try using the HELP key more often. Many such programs have
line-by- line and topical help capabilities.

> It gets copied onto line 13 (Capital gain or loss) with>`sched D not
required'' checked. (Turbotax picked up the
>
> numbers online from the mutual fund itself.)

Or, it obtains the information from your 1099-DIV from that fund.

> That puts it in the stream for taxation as ordinary income,
> unless I'm missing something.

You are.

> On the other hand, isn't it supposed to be taxed at 15% max?

Yes

> Is there some following step that handles it?

Yes, see the line instructions for line 44. Actually you
need the instructions on page 36 of the 1040 book to
calculate the correct amount of tax. In other words, you
DON'T use the Tax Tables to figure the tax liability (and
neither does TT).

> I get no IRS forms or instructions thanks to e-filing the
> previous year, so it's all reverse engineering.

It doesn't have to be that way. ALL forms and instructions
can be downloaded (and printed) from the IRS website
(www.irs.gov)

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>

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