Question

Elsie received the following distributions from Virginiana Mutual Fund for the calendar year 2019:

Ordinary dividends (nonqualifying)	$250
Capital gain distributions	$170
Nontaxable distributions	$80

Elmer, Elsie's husband, did not own any of the Virginiana Mutual Fund shares, but he did receive $1,600 in interest on a savings account at the Moss National Bank. Elmer and Elsie filed a joint income tax return for 2019. What portion of the distributions from Virginiana Mutual Fund is taxable as ordinary income on their 2019 individual income tax return?

a.$420

b.$0

c.$500

d.$250

e.None of these choices are correct.

Answer 1

Capital Gain Distributions from Mutual funds are considered and are taxable as Long-term capital gains and hence cannot be considered as ordinary income. Moreover, capital gains are taxed at 0% in cases where taxable income is less than $78,750 which is applicable in this case.

Hence, the portion of the distributions from Virginiana Mutual Fund is taxable as ordinary income on their 2019 individual income tax return is $250 of Ordinary dividends (nonqualifying).

Hence, correct option is d.$250

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