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As a shareholder, you are entitled to receive any capital gains your Van Kampen fund has paid during the year. Because you may have
questions about this topic, we’ve provided a Q&A with some helpful information on capital gain distributions and how they may
affect you.
A: Portfolio managers regularly buy and sell securities for the
fund. When they sell securities for more than the purchase
price, the fund realizes a capital gain. (Conversely, when
portfolio managers sell securities for less than the purchase
price, the fund realizes a capital loss.) The fund’s total capital
gains, minus any capital losses, must be passed through to
shareholders at least once a year.
A: Yes, any capital gain distributions that you receive are typically
taxable (unless you purchase your shares through an IRA or
other tax-deferred investment)—just as they would be if you
had bought and sold those same securities yourself.
The tax rate for capital gains depends on your tax bracket and
the length of time the securities were held by the fund before
they were sold.
- Gains on securities held for one year or less are considered
short-term capital gains to the fund. When these amounts
are distributed to shareholders, they’re considered ordinary
dividends and are taxed at your ordinary income rate.
- Gains on securities held by the fund for longer than one
year are considered long-term capital gains. Long-term
capital gain distributions can be offset by certain capital
losses from other sources, and the remainder is taxed at a
maximum rate of 15 percent.
A: While dividend income from your tax-exempt fund may
be exempt from federal income tax (and sometimes state
and local taxes as well), capital gains are always subject
to taxation.
A: Capital gain distributions, as well as dividend income from
taxable funds, are taxable—whether you receive them in cash
or reinvest them. Remember, however, that when you reinvest
your capital gain distribution, you purchase additional fund
shares and greater compounding potential.
A: Capital gain distributions change depending on the net capital
gain from investment decisions made by the fund’s portfolio
managers. As many factors influence the managers’
determination of whether to continue to hold or sell a
particular security, the level of capital gain a fund must
distribute will typically vary from year to year.
A: Although your fund’s value may be down for the year, the
securities that were sold by the fund’s portfolio managers
could have appreciated significantly since the managers first
purchased them. Capital gains are based on when the fund’s
managers purchased those securities, regardless of when you
purchased your shares. You can find your individual capital gains information on your Form1099-DIV, which you should receive in mid February. If you have
any questions about your Van Kampen fund, please contact your financial advisor. Van Kampen does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. It was
not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be
imposed on the taxpayer under U.S. federal tax laws. Federal and state tax laws are complex and constantly changing. You should
always consult your own legal or tax advisor for information concerning your individual situation.
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capital gain distribution?
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