Interest and Dividend Income

True. Interest income from savings accounts, certificates of deposit, and checking accounts is paid by banks, savings and loan associations, and credit unions is taxable, as accrued.

True. Interest income from certain short-term corporate obligations paid by banks and similar organizations and corporations is taxable, at maturity.

Generally true. Interest income from Series E or EE Bonds or Series I Bonds paid by the US Treasury is taxable at maturity or when cashed or the taxpayer may elect as earned. If the proceeds from qualified bond are used to pay qualified higher education expenses, the interest is not taxed.

True. Interest income from Series H or HH Bonds paid by the US Treasury is taxable, as accrued.

True. Interest income from Treasury Bills paid by the US Treasury is taxable, at maturity.

True. Interest income from Treasury Notes/Bonds paid by the US Treasury is taxable, as accrued.

False. Interest income from Municipal bonds paid by state and local governments is not taxable.

False. Interest income from exempt-interest dividends paid by mutual funds is not taxable.

True. Interest income from corporate bonds paid by corporations, including public utility companies is taxable, as accrued.

True. Interest income from other bonds and notes paid by various sources is taxable, as accrued.

True. Interest income from personal loans and notes paid by the borrower is taxable, as received.

True. Interest income from sales contracts paid by the purchasers is taxable, as accrued.

True. Interest income from insurance dividends left on deposit paid by an insurance company is taxable, as accrued.

True. Interest income from overpaid income tax paid by US/state/local governments is taxable, year received.

Banks, savings and loans, and other payers of interest will report tax exempt interest on a Form 1099-INT. The taxpayer should report tax exempt interest on Form 1040 line 8b.

Capital gain distributions are amounts paid by mutual funds, regulated investment companies, and real estate investment trusts. These amounts represent the shareholder's portion of gain from the sale of capital assets owned by these investment companies. Capital gain distributions are taxed in the year constructively received and are always considered to be held long term.

(1) A mutual fund is an open-ended investment company that invests money of its shareholders in a usually diversified group of securities of other corporations. (2) A company that is in the business of buying and selling stocks and sharing its income with those investing in it (sometimes called a regulated investment company).

Non-taxable distributions is a general term applied to stock dividend distributions that are not taxable. These distributions generally take the form of return of capital, stock dividends, stock splits, and/or tax-free distributions.

Ordinary dividends are the most common type of distribution from a corporation. They are paid out of the earnings and profits of the company. Ordinary dividends are taxable as ordinary income unless they are qualified dividends.

Ordinary income (loss) is income (loss) that is fully includable in (deductible from) gross income and that does not have the characteristics of capital gain or loss.

Qualified dividends are dividends received on share of common stock held by the taxpayer for more than 60 days of the 121-day period beginning 60 days before the ex-dividend date (more than 90 days of the 181-day period beginning 90 days before the ex-dividend date for preferred stock). These dividends qualify for long-term capital gain treatment.

Returns of capital (non-taxable distributions) are a retun of a shareholder's investment generally made because an excess amount of capital has been accumulated. Returns of capital may be received in cash or reinvested to acquire additional share at the shareholder's request. Amounts received that are not in excess of the basis of the stock on which paid are not taxable. The basis of the stock on which returns of capital are paid must be reduced. Amounts received in excess of the basis of the stock on which return of capital are paid are reported on Schedule D.

A stock dividend is additional share of stock distributed to shareholders at no cost. The number of shares received are a percentage of the share owned. The basis of the original shares is generally apportioned equally to the total share owned after the distribution.

Interest is money paid or received for the use of money.

The interest penalty is entered on Form 1040, line 30 and subtracted from total income.