additional mutual fund shares bought with dividend money?

Question

I am not sure how to report the shares that were bought with dividend money.

let's say I bought 10 shares of certain mutual fund for 10 dollars, and I received 20 dollars as dividends and automatically reinvested and bought 2 more shares, then I sold all 12 shares.

How should I report the 2 extra shares? I received 1099-div for the dividends and 1099-b for the transactions.

thanks

yes, the 2 shares are in the 1099-div, but when I sold them, they worth more. should I include them on schedule D?

So for Schedule D, I would include the initial 10 shares, then record another line for the 2 shares, right?

Answer 1

Report exactly what is on the 1099's. That is what was reported to the IRS. Those two extra shares should already be included in the 1099.

Answer 2

The year that you got the 2 additional shares, you'd have gotten a 1099-DIV from the mutual fund company showing the amount of the dividend, and you'd have paid taxes on it then. When you sell the stock, you'd report the sale of all the shares, but your basis would be what you paid for the ofiginal ones PLUS the dividend amount that you paid the taxes on. If all this happened in the same year, the answer is the same - report the 1099-DIV amount on your return as dividends, then report what you paid for the original shares plus the dividend amount as your basis.

Answer 3

The reinvested dividends are taxable as ordinary income unless they're qualified dividends where they'd be treated as long-term capital gains. Whether dividends are paid to you or are reinvested doesn't matter, they are taxable when paid to you or on your behalf.

Whatever the price per share for the new shares works out to be is the basis for the new shares.

Answer 4

once you purchase a percentage you're figuring out to purchase area of the organization. the organization percentage offered through you belongs to you explicitly. you are able to opt for which organization to purchase. once you purchase mutual fund you're figuring out to purchase area of the companyn circuitously. the organization percentage offered through mutual fund is offered on behalf of many people like you. Mutual fund domicile makes a call which organization percentage to purchase and also you've were given no say in the count number.