Taxes on Mutual Funds: Payment Vs Reinvestment?

Question

On my mutual funds, I received transactions like this:

Dec 18, 2007 Capital Gain Reinvested $63.16
Dec 18, 2007 Capital Gain Payment $29.81
Dec 18, 2007 Dividend reinvestment $12.28

This is a tax question - I understand what is going on here, but I forget which is short term and which is long term - the payment or the reinvestment? I know the dividend is normal income.

thanks!
~nf

vb - thanks, but although the clock starts on these new deposits, the distributions themselves are taxable. I'm positive on this. It's just which is short and which is long. I think ING just uses an odd lexicon on its statements.

And definitely some of it is long term. If you look at schedule D, there's a "Capital Gain Distribution" field. This is where one of these is marked.

Answer 1

For tax purposes, there is NO difference between reinvesting dividends/capital gains and having them paid out and then investing the proceeds back into the fund.

Answer 2

The reinvestments are the same as cash you invest yourself, so they simply START the holding clock. Until you've had the money in there for over a year, it's short term.

The Capital Gain payment is from the fund and is probably a capital gains distribution. this will show on a 1099-div and it's long term.

Answer 3

That's kind of weird because.....

One of my funds shows a "Capital Gain Payment" also I wasn't 100% sure what it means. I have never seen that term used before. Like you, I also had line items for Capital Gains and Dividend Reinvestments.

I guess that we will both find out when the 1099s come out.