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Quick question: my wife and I own about $250,000 worth of

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Vanguard funds - since 2000...
Quick question: my wife and I own about $250,000 worth of Vanguard funds - since 2000 or so - but we never sold any of these investments. However, for 2015 Vanguard sent us a formal report showing not only the ordinary and qualified dividends earned by the funds in 2015 but also, for the first time, 'total capital gains distributed' of some $11,000.
The fine print states that this information is being furnished to the IRS and mentions possible penalties.
I called Vanguard but was rebuffed - a refusal to give any advice.
Please advise! Ferdinand
Submitted: 1 year ago.Category: Tax
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Answered in 18 minutes by:
9/24/2016
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 1 year ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,265
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi. I can help you here ... My name's Lane.

...

Mutusl funds, by law, (if they are (1) classic mutual funds - open ended investment companies, and (2) owned individually or jointly, as opposed to being owned inside a qualified plan or IRA), must pay out capital gains and interedt in the forms of dividends each year.

...

This is different from an individual security such as a stock or bond, which would only generate capital gains when sold. (a bond would of course generte interest all along the way).

...

But with mutual funds you get BOTH capital gains that must be distributed as a dividend each year, becasue of the buying and selling that is going on with the securities inside the fund (again, for non-qualified ownerships) AND (2) the capitl gain that can come from selling the shares of the fund itself.

...

If you have been re-investing those dividends all along the way (typically the default setup) then you are dding to your basis and getting some of the gins out of the way all ALong the way, so that when you DO sell the fund shares, your TAXABLE gain is not NEARLY what it would have been if the fund were, say, a stock.

...

If you'll go onlline and get your previous annual tax information, (for the non-qualified fund shares you own) you'll likely see the that this was sent (or possibly just filed if you've gone paperless at some point) all along.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 1 year ago

(sorry for the typos - the system is not letting me edit this evening, for some reason)

...

Please let me know if you have any questions at all, before rating me

...

If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit") ... Otherwise I receive no crediting for the work here.

...

Thank you!

Lane

I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
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