Calamos Investments - Tax FAQ

Frequently Asked Questions

DIVIDENDS & DISTRIBUTIONS

What are qualified dividends? Qualified dividend income (QDI) are those dividends received by an individual shareholder from domestic or qualified foreign corporations that may be eligible (depending on the holding period and other factors) to be taxed at reduced capital gains tax rates. Review IRS publication 550 or consult with your tax advisor for more information specific to your tax situation.

Why did I receive an IRS Form 1099-DIV for my Uniform Gift or Uniform Transfer to Minors account? You received IRS Form 1099-DIV for your Uniform Gift or Uniform Transfer to Minors account since the IRS requires the taxpayer to report all income, no matter the age of the account holder. Minors who have earned more than a certain dollar amount may be required to file a federal income tax return. Consult your tax advisor regarding your reporting situation.

Why are nontaxable distributions listed on IRS Form 1099-DIV? Nontaxable distributions are distributions from your fund(s), which are a return of capital to you. You must reduce your cost (or other basis) by the amount shown in column three of IRS Form 1099-DIV. However, if you recover all of your cost (or other basis), you must report any excess nontaxable distributions as capital gains even though IRS Form 1099-DIV shows them as nontaxable. Review IRS publication 550 for assistance in determining if the amount shown in column three is nontaxable to you.

Why doesn't my IRS Form 1099-DIV match my annual statement? Calamos determines each fund's taxable income and capital gains after mailing your annual statement. At the end of the year, it is sometimes necessary for Calamos to adjust a fund's distributions to properly reflect the fund's actual taxable income and capital gains for the year. This process is commonly referred to as a reallocation. If a reallocation occurred on a fund in which you have an investment, the information provided on your annual statement and your Form 1099-DIV will differ.

Do I have to pay taxes on distributions that are reinvested in my account? Distributions of dividends and capital gains by your fund may be subject to income tax regardless of whether you receive them in cash or reinvest them in additional shares.

How will I know how to report dividends, short-term gains and long-term capital gains distributions on my tax return? In January, you will receive IRS Form 1099, which will identify all the distributions the fund paid to you during the tax year. This form will indicate whether these distributions were ordinary income dividends, long-term capital gains distributions, or return of capital.

What is a distribution's record date? The record date is the date a shareholder must hold the fund to qualify for a distribution of dividends and/or capital gains. Only shareholders of record on that date are eligible for that particular distribution, and those who invest after that date are not.

What is a distribution's ex-date? The ex-date, or ex-dividend date, is the date the mutual fund's assets are set aside for a distribution of dividends and/or capital gains for shareholders. On this date, the fund's share price, or net asset value per share, decreases by the amount of the distribution. The net asset value may also change on that date because of market activity affecting the value of the fund's portfolio holdings.
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COST BASIS

What is cost basis? Cost basis is the original price at which you purchased shares of your mutual fund, plus or minus certain tax basis adjustments. If you received mutual fund shares as a gift or through inheritance, special tax basis rules will apply. You will need to calculate cost basis if you sell your shares to determine if you have a capital gain or loss. There are several methods for which you can calculate cost basis, including First In, First Out; Specific Identification; Average Cost - Single Category; and Average Cost - Double Category. Refer to IRS Publication 564 or consult your tax advisor for assistance in computing cost basis and determining which cost basis method may be best for you.

Why did I receive a Form 1099-B/cost basis when I only exchanged shares? The IRS considers exchanging shares a taxable event and treats an exchange as a sell transaction in which shares are sold out of the original fund and purchased into the receiving fund or funds.

How does a return of capital affect my cost basis? Return of capital distributions reduces your cost basis. For instance, if your cost basis is $100 and you receive a return of capital of $10, your cost basis is reduced to $90.
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FORMS

What tax forms will I receive? If you have questions about what forms you'll receive, go to the About IRS Tax Forms area of the site.
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CAPITAL GAINS AND LOSSES

What is a capital gain? A capital gain results from selling an asset, including shares of a mutual fund, at a price higher than its adjusted purchase price. A capital loss is when you sell an asset at a price lower than its adjusted purchase price.

What is a capital gain distribution? A capital gain distribution can occur when a fund buys and sells securities within its portfolio, which results in a net capital gain for the fund. This capital gain distribution is taxable for non-IRA accounts. A shareholder capital gain occurs when a shareholder sells share for a gain in a taxable, non-IRA account.

How is a capital gain different from a capital gain distribution? A capital gain results when a shareholder sells his or her mutual fund shares. A capital gain distribution occurs when a mutual fund sells securities within its portfolio, resulting in a capital gain for the fund.

If I receive a capital gain distribution but owned my shares less than a year, how is it taxed? If you held your mutual fund shares for less than a year, a distribution of long-term capital gains by the fund is taxed as a long-term capital gain.

What is the tax rate on capital gains that are not long-term, but short-term? If you have a short-term capital gain—a gain on assets you held for one year or less—the gain is taxed at your ordinary income tax rate.

Why do funds have to pay out taxable gains? Mutual funds pay out taxable gains in order to qualify as a regulated investment company (RIC) under the Internal Revenue Code. Qualifying as a RIC makes the fund eligible to pass through any income and gains to shareholders without having to pay taxes at the fund level. This avoids a double taxation on the same income at both the fund and shareholder level. To qualify as a regulated investment company, the fund must pay out at least 90% of its income and short-term gains realized during its tax year. Additionally, the fund must pay out 98% of its calendar year income and 98% if its capital gains realized through October 31 of each year in order to avoid federal excise taxes.

Do I have to use the cost basis and gain/loss information provided by Calamos Investments? No, you are not required to use the gain or loss statement provided by Calamos Investments. Calamos supplies you with average cost reporting as a service. Calamos does not provide gain or loss data shown on your average cost statement to the IRS or any state taxing jurisdictions. Since the IRS allows you to use various methods to calculate your tax basis, you should ask your tax advisor for assistance.

What is a wash sale? If you purchased a mutual fund share (or reinvested dividends) within 30 days before or after you redeemed shares of the same mutual fund at a loss, the redemption is considered a wash sale. All or a portion of the loss may be deferred until the acquired shares are sold.
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IRAs

What is the difference between a Roth IRA and a Traditional IRA? The major difference between a Roth IRA and a Traditional IRA is that Roth IRA contributions are not tax deductible, but the withdrawals will not be taxed as long as you do not take them within five years of when you opened your account and not before you turn 59-and-a-half years old. See IRS publication 590 for additional information.

Are my IRA contributions deductible? Contributions to a Traditional IRA may be deductible depending on your income level, filing status and participation in another tax-deferred plan. Contributions to a Roth IRA are not deductible.

How many educational savings accounts can one child have? There is no limit to the number of educational savings accounts one child can have, though the maximum total contributions per year to all accounts for one child cannot exceed $2,000.

What are the tax implications of a Coverdell Education Savings Account (CESA)? Earnings of a Coverdell Education Savings Account (CESA) accumulate tax-free, qualified withdrawals are non-taxable, and contributions are not deductible.
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MISC.

Why was there withholding on my account? Generally, there is withholding because the fund did not have a signed application or IRS Form W-9 on file, or the IRS has instructed the fund to withhold on distributions made from your account.
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None of the information on this Web site should be considered legal or tax advice. You should consult your legal or tax advisor for information concerning your own specific tax situation.

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