Frequently Asked Questions
What is a capital gain distribution?
A capital gain is a profit that a mutual fund realizes by selling securities for a price higher than at which they were purchased. Capital gains must also be paid to shareholders at least once per year. When distributed to shareholders, any realized gains are offset by any realized losses resulting in a distribution of the net capital gain. Unrealized gains on investments that have increased in value but have not been sold by the fund are not required to be distributed. The daily NAV includes unrealized gains.
Capital gain distributions paid by a mutual fund are taxable and reported on IRS Form 1099-DIV. Form 1099-DIV is not applicable to IRAs and other tax-deferred accounts.
What is the difference between long and short-term capital gains?
Short-term capital gains are from the sale of assets the fund held one year or less and are taxable as ordinary income. Long-term capital gains are from the sale of assets the fund held more than one year and generally qualify for lower tax rates.
What is a dividend distribution?
A dividend distribution is income from dividends and interest earned by a mutual fund's holdings. Dividends that a fund earns must be paid to shareholders at least once per year.
When are dividends and capital gains paid?
Thrivent Mutual Funds distribution policy is as follows: money market and most bond funds generally declare income dividends daily and distribute them monthly. Income dividends are often paid quarterly for balanced funds (stocks, bonds, and cash). Capital gains (if required) for equity and bond funds are generally paid after fiscal year-end and before calendar year-end. Thrivent Mutual Funds typically distributes capital gains in December.
How do I determine if I will receive a dividend or capital gain distribution and when I will receive it?
The timing of a distribution and the determination of which shareholder is eligible to receive it is based upon the record date. The date the distribution is paid is the ex-dividend date.
- Record Date: All shareholders who own shares as of the end of this day are eligible to receive the distribution. This date is usually the business day prior to the ex-dividend date.
- Ex-dividend Date/Payable Date: The date on which the distribution amount per share is deducted from the fund's net asset value per share. The fund pays shareholders their share of the distribution on this date.
How will capital gains and dividend distributions affect my taxes?
Mutual fund distributions are taxable, both when reinvested and paid out in cash, except when earned on qualified retirement accounts (i.e., 401(k), 403(b), IRA). If dividend and capital gain distributions are taken in cash on a qualified account, this is considered a distribution from the account and may be taxable.
Dividend distributions are taxed at ordinary income tax rates unless the dividends are qualified. Qualified dividends are dividends that the mutual fund has received from certain domestic and foreign corporations. Qualified dividends are taxed at the same rates as long-term capital gains.
Long-term (held more than one year) capital gains distributions are taxed at long-term capital gains tax rates; distributions of short-term (held one year or less) capital gains are taxed at the same rates as ordinary income. Ordinary income tax rates are generally higher than long-term capital gains tax rates.
How will I receive the tax information regarding capital gain distribution?
Thrivent Mutual Funds provides estimated capital gain information with the third quarter statements each year. The information is also available online and will be updated monthly until the distributions are made. The estimated capital gain information is subject to change based upon fund activity.
Your fourth quarter statement will include the amounts of any capital gain distributions made for the fund. This information will also be available online. Capital gain distributions are reported on Form 1099-DIV. For tax purposes, you will need to use Form 1099-DIV to obtain the proper allocation of dividend and capital gain information.
When will I receive my IRS Form 1099DIV for 2016?
Your Form 1099-DIV will be mailed to you by February 15, 2017 unless you were invested in the following funds:
- Thrivent Growth and Income Plus Fund
- Thrivent Diversified Income Plus Fund
Form 1099-DIV will be mailed in late February for the above funds because they include holdings in real estate investment trusts (REITs). Funds that invest in REITs must wait until after year-end for additional information from the REIT in order to correctly classify the distributions from the fund as a dividend, capital gain or return of capital.
Should I wait to buy a fund until after the dividend or capital gain distributions are made?
If you are considering purchasing a mutual fund within a qualified retirement account, a dividend or capital gain distribution should not affect the timing of your investment decision since typically they do not have any tax consequences while the assets remain in the account.
For new investments within a taxable account, upcoming distributions raise some considerations. The distributions will result in taxable income and should be considered in timing your overall investment decision.
There is usually no taxable benefit to purchasing the shares immediately before the distribution (sometimes referred to as "buying the distribution") since the share price will be adjusted by the same amount as the distribution. You should also keep in mind the amount of the distribution based on the size of your expected investment.
While important, tax consequences should be only one of many factors considered when deciding to purchase a mutual fund.
Is the fund's share price affected when a dividend or capital gain distribution is paid?
On the distribution date, the fund net asset value (NAV) is reduced by the amount of the distribution. (The fund NAV also reflects any changes in security valuations on the day the distribution is paid.)
Does a fund's dividend or capital gain distribution affect its total return?
Total return includes distributions (capital gains and dividends) as well as capital appreciation (rise or fall in NAV). Positive dividend and capital gain distributions will have a positive effect on the total return. An investor’s total return will also vary depending on whether the distributions are reinvested or kept as cash.