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Publication 564 2003 Tax Year

Publication 564
Introductory Material

This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents

Important Changes

Lower maximum tax rates on capital gain. For sales and other dispositions of property after May 5, 2003, the 20% maximum tax rate on net capital gain has been lowered to 15%, and the 10% rate has been lowered to 5%. In addition, the 8% rate for qualified 5-year gain has been eliminated. Instead, the new 5% rate applies to gain that would have qualified for the 8% rate. See Capital Gain Tax Rates, later.

Qualified dividends. Qualified dividends you received in 2003 are taxed at the same 5% or 15% rate that applies to a net capital gain. For details, see Qualified dividends under Ordinary Dividends, later.

Important Reminders

Reporting dividends on your return. If you file Form 1040A, you must attach Schedule 1 to your return if your ordinary dividend income is more than $1,500; if you file Form 1040, you must attach Schedule B to your return if your ordinary dividend income is more than $1,500.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1–800–THE–LOST (1–800–843– 5678) if you recognize a child.

Introduction

This publication provides federal income tax information for individual shareholders of mutual funds, including money market funds. It explains how to report distributions paid to you by a mutual fund and any expenses connected with your investment. In addition, it explains how to report undistributed long-term capital gains. It also explains how to figure and report your gain or loss when you sell, exchange, or redeem your mutual fund shares. A comprehensive example, with filled-in forms, appears at the end of the publication.

Mutual fund.   A mutual fund is a regulated investment company generally created by “pooling” funds of investors to allow them to take advantage of a diversity of investments and professional management.


Money market fund.    A money market fund is a mutual fund that tries to increase current income available to shareholders by buying short-term market investments.


  Money market funds pay dividends and should not be confused with bank money market accounts that pay interest.


Qualified retirement plans and IRAs.   The rules in this publication do not apply to mutual fund shares held in individual retirement arrangements (IRAs), section 401(k) plans, and other qualified retirement plans. The value of the mutual fund shares and earnings allocated to you are included in your retirement plan assets and stay tax free generally until the plan distributes them to you. The tax rules that apply to retirement plan distributions are explained in the following publications.

  • Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans).

  • Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans).

  • Publication 575, Pension and Annuity Income.

  • Publication 590, Individual Retirement Arrangements (IRAs).

  • Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits.


Comments and suggestions.   We welcome your comments about this publication and your suggestions for future editions.


  You can e-mail us at *[email protected]. Please put “Publications Comment” on the subject line.


  You can write to us at the following address:


Internal Revenue Service
Individual Forms and Publications Branch
SE:W:CAR:MP:T:I
1111 Constitution Ave. NW
Washington, DC 20224


  We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.


Useful Items - You may want to see:

Publication

  • 550 Investment Income and Expenses

Form (and Instructions)

  • Schedule B (Form 1040)
    Interest and Ordinary Dividends

  • Schedule D (Form 1040)
    Capital Gains and Losses

  • Schedule 1 (Form 1040A)
    Interest and Ordinary Dividends for Form 1040A Filers

  • 1099–B
    Proceeds from Broker and Barter Exchange Transactions

  • 1099–DIV
    Dividends and Distributions

  • 2439
    Notice to Shareholder of Undistributed Long-Term Capital Gains

  • 4952
    Investment Interest Expense Deduction

See How To Get Tax Help near the end of this publication for information about getting these publications and forms.

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