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Here you can find important information about how taxes, dividends and other distributions may impact your fund holdings. You can also find historical information about dividends, distributions and capital gains from Transamerica mutual funds.
Transamerica does not provide tax advice. You should consult with a qualified tax professional for guidance about your particular situation. Additional information is available from the Internal Revenue Service website. (www.irs.gov)
IRS Cost Basis Reporting
For Cost Basis information and frequently asked questions, please click the following link for related information from the IRS:
Cost Basis Reporting - What you need to know
The information below offers a broad overview on how taxes are involved with mutual funds. Transamerica does not provide tax advice. You should consult with a qualified tax professional for guidance about your particular situation.
Additional information is available on the Internal Revenue Service website. For specific information regarding year-end tax reporting and IRS forms Transamerica Funds may send to you, click here: Year-End Tax Reporting for Transamerica Fund Shareholders.
Mutual funds, like most financial products, involve taxes. A "taxable event" is a transaction that creates tax implications. Mutual fund taxable events may result when:
- You receive dividends and/or capital gain distributions from the fund. Federal tax laws require funds to pay out all or virtually all net income and net capital gains, if any, to shareholders in the form of cash or reinvested shares. The tax implications depend on the type of distribution and the type of account you own.
- You sell (redeem or exchange) fund shares. The tax implications vary depending on the type of account you own.
In addition, some states may impose an intangibles tax on the value of shares owned.
- For taxable accounts, distributions are generally taxable the year they are received (whether as cash or reinvested shares). One exception is that certain distributions declared in the last three months of one year but paid in January of the next year are taxed in the year they were declared.
- For tax-deferred accounts, such as IRAs, dividend and capital gains distributions are not taxable until you withdraw such distributions.
- For tax-exempt accounts, distributions of income are generally not taxable. Keep in mind, however, that distributions from capital gains generally are taxable.
Other important distribution information for individual taxpayers:
- Distributions of long-term capital gains and from certain qualifying dividends are generally not taxed at a rate greater than 20%.
- Shareholders must hold the stock for more than 60-days during a specific period to obtain the lower tax rate on distributions of qualifying dividends.
- Distributions of earnings from non-qualifying dividends, interest income, other types of ordinary income, and short-term capital gains (i.e. on shares held for less than one year) will be taxed at the ordinary income tax rate applicable to the taxpayer.
- Ordinary income dividend distributions. Mutual funds that invest in interest-bearing bonds or certain types of dividend-paying stocks pass any resulting income to shareholders after deducting fund expenses. For tax-exempt funds, most income is generally exempt from federal income tax; however, it is possible that a tax-exempt fund could earn taxable interest income. Such income would be distributed to shareholders as "taxable" income dividends.
- Capital gain distributions. When mutual funds sell securities for a profit (or loss), the fund realizes a capital gain (or loss). Securities sold and owned by the fund for less than one year result in "short-term" gains or losses. Securities sold and owned by the fund for one year or longer generally result in "long-term" gains or losses. Funds offset any gains with any losses during its tax year and any capital loss carry forward amounts from prior tax years and if any net gains remain, they are distributed to shareholders.
- Distributions of "Qualified Dividends." Dividend distributions derived from certain qualifying dividends on corporate stock are subject to a maximum tax rate for individual taxpayers of 20%. Note that distributions of earnings from dividends paid by certain "qualified foreign corporations" can also qualify for the lower tax rates on qualifying dividends. Shareholders must satisfy a 60-day holding period requirement to obtain the lower tax rates on distributions of qualifying dividends.
Generally, when you sell (redeem or exchange) mutual fund shares, you create a taxable event. Tax implications vary, depending on the type of account you own:
- Taxable accounts. Selling mutual fund shares usually results in a taxable capital gain or loss, based on your "cost basis" (i.e., what you originally paid for the shares plus any reinvested dividends). Selling shares for more than your cost basis results in a capital gain and selling shares for less than your cost basis results in a capital loss.
If you sell shares owned for one year or less, the resulting gain or loss is considered "short-term." If you sell shares owned for longer than one year, the gain or loss is considered "long-term." Under current law, the maximum tax rate for individuals on long-term capital gains is generally 20%.
The IRS views the exchange out of one fund and into another as a sale of one investment and the purchase of another. If you had such a transaction during the year, Transamerica Funds will report this to you and the IRS on Form 1099-B. Redemptions and exchanges from money market accounts, however, are not reported on Form 1099-B, because your proceeds and cost basis are usually the same (no gain or loss).
Note: If you receive an exempt-interest dividend on shares that you held for six months or less, any loss on the sale, redemption, or exchange of the shares will generally be disallowed up to the exempt-interest dividend amount you received.
- Tax-deferred accounts. When you sell shares and then withdraw the proceeds from a qualified plan or tax-deferred account such as a Traditional IRA, you generally create a taxable event. Typically, every dollar withdrawn from the account is taxable at your ordinary income tax rate.
Further, should you withdraw money from a tax-deferred account before the age of 59½, you may be subject to an additional 10% federal tax penalty. Distributions from tax-deferred accounts are reported to you and the IRS on Form 1099-R.
As with all mutual funds, Transamerica Funds may be required to withhold U.S. federal income tax at the fourth lowest tax rate applicable to unmarried individuals (currently 28%) on all taxable distributions payable to you if: a) you fail to provide the fund with your correct taxpayer identification number; b) you fail to make required certifications; or c) if you have been notified by the IRS that you are subject to backup withholding.
Backup withholding is not an additional tax; it is a method by which tax laws ensure the collection of taxes due. Any amounts withheld may be credited against your U.S. federal income tax liability.
|Tax Terminology||Reported to you/IRS on Form
1099-DIV for Individuals
|Federal Tax Rates|
|Ordinary Income dividend (non-tax-exempt income/funds)||Ordinary dividends/income||Same as regular taxable income such as wages|
|Income dividends (federally tax-exempt income)||Exempt-interest income dividends||Generally not taxable|
|Short-term capital gain distributions *||Ordinary dividends/income||Same as regular taxable income such as wages|
|Dividends from qualifying dividends||Qualifying dividends||Maximum rate of 20% for individuals|
|Long-term capital gain distributions *||Capital gain||Lower capital gain rates|
|Return of capital distribution||Non-taxable distribution/return of capital||N/A**|
*As a result of funds selling investments at a profit and paying these profits to shareholders. These distributions are taxable even if paid by 'tax-exempt' funds. **This represents a return of your principal, not money from fund earnings. Such a distribution reduces your cost basis since part of your investment was returned to you. Funds rarely make such a distribution.
Regarding distributions and their effect on share price and account balance, first keep in mind three important dates:
- Record Date: The date (as of close of business) on which a shareholder must own shares in order to receive a declared dividend or capital gain distribution.
- Ex-Dividend Date (also known as "Ex-Date"): The date on which the Net Asset Value is reduced by the amount of a distribution, to account for being paid out to shareholders either as cash, or in the form of reinvested shares at the reduced ex-date price.
- Payable Date: The date that distributions (in the form of cash or reinvested shares) are sent to shareholders. This date is often, but not always, several days after the ex-date.
Distributions are generally taxable events that do not increase the value of your account. When distributions are paid, the total distribution per share reduces the fund's Net Asset Value (NAV) per share by the same amount.
If distributions are reinvested, the fund adds shares to your account soon after the ex-date. Since the NAV price is lower, however (assuming no market fluctuation effects on the ex-date), your account balance is unchanged from the distribution.
If you receive distributions in cash, no shares are added to your account since the money is paid out to you, and your account value would decrease by the amount of cash paid.
Examples of a cash distribution and reinvested distribution:
Effect of distribution on share price and account value
- John owns 1,000 fund shares on the record date.
- The fund NAV the day before ex-date (Monday) is $22.50 per share.
- The fund makes a $2.00 distribution on Tuesday (ex-date).
- There are no market fluctuations on Tuesday so the NAV is affected only by the distribution.
Based on these assumptions:
- John's account value as of Monday is $22,500 (1,000 shares X $22.50 NAV).
- NAV on Tuesday (ex-date) drops to $20.50 (assuming no market fluctuations on ex-date).
|Scenario 1: John receives the distribution in cash||Scenario 2: John reinvests the distribution|
|1,000 shares owned x $2.00 per share = $2,000 cash paid to John.||1,000 shares x $2.00 per share = $2,000 in additional shares purchased.|
|No shares are added to John's account.||$2,000 divided by ex-date price of $20.50 per share = 97.561 shares added to John's account.|
|Account value on ex-date = $20,500 (1,000 shares x $20.50 per share).||John now owns 1,097.561 shares.|
|Total investment value on ex-date = $22,500 ($20,500 account value + $2,000 cash paid).||Total investment value on ex-date = $22,500 (1,097.561 shares x $20.50 per share)|
As an investor, you should be aware of the potential of "buying a distribution" by investing near the "record date" of a distribution. Because distributions are made evenly across all shares owned on the record date, regardless of how long you've owned them, when you invest just before or on the record date for a fund's distribution, you end up receiving a portion of your investment back in the form of a taxable distribution. This may result in a tax liability for you without having received the growth potential of those shares over time past.
Consult your financial professional or a tax advisor regarding your personal circumstances.
Transamerica Funds are advised by Transamerica Asset Management, Inc. and distributed by Transamerica Capital, Inc.
These materials are not intended to provide tax, accounting, legal advice or investment recommendations. Neither Transamerica nor its agents or representatives may provide tax or legal advice. Anyone to whom this material is prompted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors regarding their particular situation and the concepts presented herein.
Shares of the Funds may only be sold by offering the Funds’ Prospectus.
You should consider the investment objectives, risks, charges, and expenses of the Funds carefully before investing. The Prospectus contains this and additional important information regarding the Funds. To obtain the Prospectus and/or a summary Prospectus, please contact your financial professional or call 888-233-4339. The Prospectus should be read carefully before investing.
Investing in mutual funds involve significant risks, including the risk that you may lose part or all of the money you invest. For a complete discussion of the risks associated with each fund, please read the prospectus carefully.
You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund's liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.