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taxmap/pubs/p550-000.htm#en_us_publink10009812
Publication 550

 
Investment 
Income and 
Expenses

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(Including Capital
Gains and Losses)

What's New(p2)


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Future developments.(p2)
The IRS has created a page on IRS.gov for information about Publication 550, at www.irs.gov/pub550. Information about any future developments affecting Publication 550 (such as legislation enacted after we release it) will be posted on that page.
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Form 8949.(p2)
Form 8949 is new. Many transactions that, in previous years, would have been reported on Schedule D (Form 1040) or D-1 must be reported on Form 8949 if they occur in 2011. Complete all necessary pages of Form 8949 before completing line 1, 2, 3, 8, 9, or 10 of Schedule D (Form 1040). Instructions for how to complete Form 8949 are included in the 2011 Instructions for Schedule D, Capital Gains and Losses.
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Adjustments to gain or loss on Form 8949.(p2)
In certain situations, you must put a code in column (b) of Form 8949 and make an adjustment to your gain or loss in column (g). See the 2011 Instructions for Schedule D.
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Schedule D-1.(p2)
For 2011 transactions, Schedule D-1 is no longer in use. Form 8949 replaces it.
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100% exclusion of gain on qualified small business stock.(p2)
You may be able to exclude from income up to 100% of your gain from the sale or trade of qualified small business stock acquired, in 2011, if you hold the stock for more than 5 years. This up to 100% exclusion also continues to apply for qualified small business stock acquired, in 2011, and held for more than 5 years. See Section 1202 Exclusion under Gains on Qualified Small Business Stock in chapter 4.
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Form 1099-B.(p2)
Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, for 2011 and later, has been expanded. As a general rule, it will include your cost or other basis, the date of acquisition, the amount of loss disallowed due to a wash sale, and whether the gain or loss is short-term or long-term, unless the property sold is a noncovered security. See the sample 2011 Form 1099-B in the Comprehensive Example in chapter 4.
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Specified private activity bonds.(p2)
A portion of the interest on specified private activity bonds issued after December 31, 2010, may be a tax preference item subject to the alternative minimum tax. See Qualified bonds issued after December 31, 2010, under Interest Income in chapter 1.
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Federal home loan banks.(p2)
A bond issued on or after January 1, 2011 (not counting renewals or extensions) and guaranteed by a Federal home loan bank will not be eligible to pay exempt interest even if the bank meets safety and soundness criteria. The bond will be treated as federally guaranteed. See Federally guaranteed bonds, under Interest Income in chapter 1.
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Build America bonds.(p2)
Bonds issued after December 31, 2010, cannot be classified as build America bonds. See Build America bonds, under Interest Income in chapter 1.
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Short sales.(p2)
If you enter into a short sale on or after January 1, 2011, your short sale will be reported on a Form 1099-B for the year in which you deliver the security to satisfy the short sale obligation. See Short-Term or Long-Term Capital Gain or Loss under Short Sales in chapter 4.
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Foreign financial assets.(p2)
If you had foreign financial assets in 2011, you may have to file new Form 8938, Statement of Foreign Financial Assets, with your tax return. Check www.irs.gov/form8938 for details.
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Fund of funds.(p2)
A mutual fund or other regulated investment company that is a qualified fund of funds, in any of its taxable years beginning after December 22, 2010, may distribute exempt-interest dividends to its shareholders. See Exempt-interest dividends under Dividends and Other Distributions in chapter 1.

Reminders(p2)


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Mutual fund distributions.(p2)
Publication 564, Mutual Fund Distributions, has been incorporated into this publication.
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New penalties for certain abusive tax shelters.(p2)
Underpayments of tax due to an undisclosed foreign financial asset are now subject to a 40% penalty. Underpayments due to a transaction lacking economic substance are now subject to a 20% penalty but may be subject to a 40% penalty in some cases. See Accuracy-related penalties in chapter 2.
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Nontaxable trades of life insurance contracts.(p2)
You will no longer be taxed for certain trades involving life insurance contracts. See Insurance Policies and Annuities under Nontaxable Trades in chapter 4.
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1256 contracts.(p2)
A section 1256 contract no longer includes certain swaps. See Exceptions under Section 1256 Contract in chapter 4 for more information.
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Changes in penalty for failure to disclose a reportable transaction.(p2)
Penalties for failure to disclose a reportable transaction on a tax return changed in 2010. See Penalty for failure to disclose a reportable transaction in chapter 2.
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U.S. property acquired from a foreign person.(p2)
If you acquire a U.S. real property interest from a foreign person or firm, you may have to withhold income tax on the amount you pay for the property (including cash, the fair market value of other property, and any assumed liability). Domestic or foreign corporations, partnerships, trusts, and estates may also have to withhold on certain distributions and other transactions involving U.S. real property interests. If you fail to withhold, you may be held liable for the tax, penalties that apply, and interest. For more information, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.
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Foreign source income.(p2)
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.
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Employee stock options.(p2)
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.
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Sale of DC Zone assets.(p2)
Investments in District of Columbia Enterprise Zone (DC Zone) assets acquired after 1997 and before 2012 and held more than 5 years will qualify for a special tax benefit. If you sell or trade a DC Zone asset at a gain, you may be able to exclude the qualified capital gain from your gross income. This exclusion applies to an interest in, or property of, certain businesses operating in the District of Columbia. For more information about the exclusion, see the Schedule D instructions. For more information about DC Zone assets, see section 1400B of the Internal Revenue Code.
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Photographs of missing children.(p2)
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.

taxmap/pubs/p550-000.htm#TXMP72c76391Introduction

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.
Deposit
The glossary at the end of this publication defines many of the terms used. A comprehensive example, with filled-in forms, appears at the end of this publication.
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Investment income.(p2)

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This generally includes interest, dividends, capital gains, and other types of distributions including mutual fund distributions.
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Investment expenses.(p2)

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These include interest paid or incurred to acquire investment property and expenses to manage or collect income from investment property.
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Qualified retirement plans and IRAs.(p2)

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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.
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(p3)

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Comments and suggestions.(p3)

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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
Individual and Specialty Forms and Publications Branch
SE:W:CAR:MP:T:I
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 email us at taxforms@irs.gov. Please put "Publications Comment" on the subject line. You can also send us comments from www.irs.gov/formspubs/. Select "Comment on Tax Forms and Publications" under "Information about."
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.
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Ordering forms and publications.(p3)
Visit www.irs.gov/formspubs/ to download forms and publications, call 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


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Tax questions.(p3)
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.