Publication 550 - Introductory Material


Future Developments

For the latest information about developments related to Publication 550, such as legislation enacted after it was published, go to www.irs.gov/pub550.

What's New

Net investment income tax (NIIT). Beginning in 2013, you may be subject to the NIIT. The NIIT applies at a rate of 3.8% to certain net investment income of individuals, estates, and trusts that have income above statutory threshold amounts. See Net investment income tax (NIIT) , later.

Maximum capital gain rates. For 2013, the maximum capital gain rates are 0%, 15%, 20%, 25%, and 28%. See Capital Gain Tax Rates , later, for more information.

Gift tax exclusion amount increased. For calendar year 2013, the first $14,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts. See Property Received as a Gift , later.

Reminders

Mutual fund distributions. Publication 564, Mutual Fund Distributions, has been incorporated into this publication.

Foreign source income. If you are a U.S. citizen with investment income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U.S. law. This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer.

Employee stock options. If you received an option to buy or sell stock or other property as payment for your services, see Publication 525, Taxable and Nontaxable Income, for the special tax rules that apply.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Introduction

This publication provides information on the tax treatment of investment income and expenses. It includes information on the tax treatment of investment income and expenses for individual shareholders of mutual funds or other regulated investment companies, such as money market funds. It explains what investment income is taxable and what investment expenses are deductible. It explains when and how to show these items on your tax return. It also explains how to determine and report gains and losses on the disposition of investment property and provides information on property trades and tax shelters.

The glossary at the end of this publication defines many of the terms used.

Investment income.   This generally includes interest, dividends, capital gains, and other types of distributions including mutual fund distributions.

Investment expenses.   These include interest paid or incurred to acquire investment property and expenses to manage or collect income from investment property.

Qualified retirement plans and IRAs.   The rules in this publication do not apply to mutual fund shares held in individual retirement arrangements (IRAs), section 401(k) plans, and other qualified retirement plans. The value of the mutual fund shares and earnings allocated to you are included in your retirement plan assets and stay tax free generally until the plan distributes them to you. The tax rules that apply to retirement plan distributions are explained in the following publications.
  • Publication 560, Retirement Plans for Small Business.

  • Publication 571, Tax-Sheltered Annuity Plans.

  • Publication 575, Pension and Annuity Income.

  • Publication 590, Individual Retirement Arrangements (IRAs).

  • Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits.

  

Comments and suggestions.   We welcome your comments about this publication and your suggestions for future editions.

  You can write to us at the following address:

Internal Revenue Service 
Tax Forms and Publications Division 
1111 Constitution Ave. NW, IR-6526 
Washington, DC 20224

  We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

  You can send your comments from www.irs.gov/formspubs/. Click on “More Information” and then on “Comment on Tax Forms and Publications.

  Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products.

Ordering forms and publications.   Visit www.irs.gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received.

Internal Revenue Service 
1201 N. Mitsubishi Motorway 
Bloomington, IL 61705-6613

Tax questions.   If you have a tax question, check the information available on IRS.gov or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.


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