26872 covers.qxp
12/11/08
7:01 PM
Page 1
P.O. Box 2600
Valley Forge, PA 19482-2600
Connect with Vanguard® > www.vanguard.com
> Refer to the phone number
on your statement.
© 2008 The Vanguard Group, Inc.
All rights reserved.
BCGB 112008
2009 Reporting of
Mutual Fund Distributions
and Sale/Redemption
of Fund Shares
Tax preparation assistance:
How to use Forms 1099-DIV and
1099-B when you file your tax return
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Page 3
This brochure explains how to report
information from the enclosed Forms
1099-DIV and 1099-B on your tax return
(Form 1040 or 1040A).
How to use Form 1099-DIV
Dividends and capital gain distributions from
taxable mutual fund accounts
Schedule B (Interest and Ordinary Dividends)
If the total of all the ordinary dividends (Box 1a) received
in 2008 from all your investments is more than $1,500, you
must list each source of your ordinary dividend income
on Schedule B (Form 1040) or Schedule 1 (Form 1040A).
If the total of all ordinary dividends received in 2008 from
all your investments is $1,500 or less, you must report it
on Line 9a of Form 1040 or Form 1040A.
Schedule D (Capital Gains and Losses)
You must report total capital gain distributions (Box 2a)
from mutual funds on Schedule D, unless both of the
following exceptions apply:
1. The only amounts you have to report on Schedule D
are capital gain distributions from Box 2a of your
Forms 1099-DIV.
2. None of your Forms 1099-DIV have an amount in Box
2b (Unrecaptured Section 1250 gain), Box 2c (Section
1202 gain), and Box 2d (Collectibles [28%] gain).
If you are not required to file Schedule D, enter your
total capital gain distributions (Box 2a) from all your
investments on Line 13 of Form 1040 and check the box
on that line or enter them on Line 10 of Form 1040A. You
also must complete a Qualified Dividends and Capital
Gains Tax Worksheet included in the Form 1040 or 1040A
instructions to determine your tax due on these amounts.
Reporting requirement for
tax-exempt interest dividends
If you received tax-exempt interest dividends in
2008, Vanguard will report this amount on Form
1099-INT. Tax-exempt interest dividends paid after
December 31, 2005, are reported on Form 1099INT as required by the Tax Increase Prevention
and Reconciliation Act of 2005 (TIPRA), which
was enacted into law on May 17, 2006. Refer
to Vanguard’s update entitled Reporting of 2008
Tax-Exempt Interest Dividends on Form 1099-INT
for information on reporting tax-exempt interest
dividends on your tax return.
For additional help, visit the Tax Center
at Vanguard.com. The Tax Center is
your one-stop source for Vanguard
tax-related information, forms, and
links to handy tools, such as our
Qualified Dividend Income Tax Tool.
www.vanguard.com
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Page 1
How to use Form 1099-B
A note about Vanguard Brokerage
Services tax forms
In some cases, brokerage tax forms will be available
in late January. Depending on the holdings in the
brokerage account, other forms will be ready in
mid-February. For example, if you received income
in 2008 from an investment classified as a regulated
investment company—such as an open-end or
closed-end mutual fund, real estate investment
trust (REIT), or unit investment trust (UIT)—your
Tax Information Statement will be mailed and
available online by February 17, 2009. The delayed
mailing is an effort to reduce the number of revised
tax forms resulting from income reclassifications
by securities issuers.
If you did not receive income from a regulated
investment company, your Tax Information
Statement will be mailed and available online
by February 2, 2009.
See the tax mailing and online posting schedule
on Vanguard.com for a full listing of tax forms and
their availability.
Capital gains or losses from the
sale/redemption of mutual fund shares
If you sold shares from your taxable Vanguard mutual
fund accounts during 2008, you may have realized a
capital gain or loss that must be reported on Schedule D.
The gross proceeds from that sale will be reported to
you on Form 1099-B, along with instructions on how to
calculate and report the gain or loss on Schedule D of
Form 1040.* Net long-term capital gains realized from
the sale of mutual fund shares are subject to a tax rate
of 15% (5% for lower income tax brackets). Note, however, that net short-term capital gains realized from the
sale of mutual fund shares held for one year or less are
taxed at ordinary income rates.
Form 1099-B lists only your account redemptions and
the gross proceeds for each sale of fund shares. To
complete Schedule D, you must report your gross
proceeds as well as cost basis, holding period for the
shares sold, and gain or loss.
Separate from Form 1099-B, Vanguard provides an
Average Cost Summary Statement that includes (in
most cases) the capital gain or loss information you
need to complete Schedule D. Vanguard uses the
Average Cost Single Category Method to arrive at an
average cost for all fund shares held in your account
up to and including the redemption date. While this is
a commonly used, IRS-approved method for calculating
the cost of shares redeemed, you can choose other
calculation methods that may be more beneficial or
appropriate for you. For more information on tax reporting and calculating tax cost basis, see IRS Publication
564, Mutual Fund Distributions, at the IRS website
(www.irs.gov), or consult with a tax professional for
additional guidance.
*Shareholders in money market funds generally will not
realize a capital gain or loss and will not receive a
Form 1099-B.
What are qualified dividends?
Distributions from U.S. corporations and certain foreign corporations are eligible for reduced tax rates
as “qualified dividends.”
Mutual funds may distribute qualified dividend income
(QDI) to shareholders. Equity and balanced funds are
likely to distribute QDI; money market and bond funds
will not distribute QDI and therefore are not eligible for
lower tax rates.
Vanguard will no longer mail personal QDI statements
to shareholders. For help in determining your personal
QDI, visit the Tax Center on Vanguard.com to use the
“Calculate your qualified dividend income” tool, which
can calculate qualified dividend income generated by
your taxable Vanguard mutual fund shares.
Box 2a (Total capital gain distributions)
Box 2a shows the long-term capital gain distributions
by fund from your taxable Vanguard mutual fund
accounts. See the example in this brochure.
Box 1a (Total ordinary dividends)
Box 1a shows total ordinary dividends, including shortterm capital gain distributions by fund from your taxable
Vanguard mutual fund accounts.
Box 1b (Qualified dividends)
Box 1b shows the portion of the amount in Box 1a
(Total ordinary dividends) that is QDI-eligible for the
reduced 15% or 5% tax rate. To claim the reduced tax
rate for QDI reported in Box 1b, you must have held
your fund shares for at least 61 days during the 121-day
period beginning 60 days prior to the ex-dividend date.
(Also known as the reinvest date, the ex-dividend date
is when the fund’s net asset value is adjusted to account
for distributions.) Your “personal QDI” is the QDI reported to you in Box 1b, reduced, if necessary, by dividends
for which you did not meet the holding-period requirement. For example, if a fund’s ex-dividend date was
6/20/2008, shares would have to have been held for
at least 61 days between 4/21/2008 and 8/19/2008 to
qualify as QDI for that distribution. If the shares do not
meet the holding-period requirement, dividends paid
on those shares do not qualify for the lower tax rates.
REIT Index Fund Form
1099-DIV mailed in February
Shareholders of Vanguard REIT Index Fund
should take note not to file their federal or state
income tax returns until they receive their Form
1099-DIV from Vanguard REIT Index Fund, which
Vanguard mails (with IRS approval) in February.
REITs generally cannot calculate their taxable
earnings until after the end of the tax year. For
this reason, Vanguard seeks an extension from
the IRS each year to mail completed Forms 1099DIV for the REIT Index Fund after the normal
deadline of January 31. Filing your tax returns
prior to receiving the Form 1099-DIV for REIT
Index Fund may require filing amended returns
and may result in the payment of additional taxes.
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Reporting mutual fund distributions
In this example, the
investor is required to
file Schedule D and has
received the following
distributions from the
XYZ Fund:
$4,291.11 in ordinary dividends, as shown in Box 1a
(Total ordinary dividends).
The investor reports
amounts shown in Box 1a
on all Forms 1099-DIV from
all sources separately,
by fund, on Line 5 of
Schedule B (Form 1040).
$2,236.07 in QDI, as shown
in Box 1b (Qualified dividends). The investor
reports the sum of all
QDI shown in Box 1b on
all Forms 1099-DIV on Line
9b of Form 1040 or Form
1040A, assuming that
the investor meets the
QDI holding-period requirement, as described above.
$2,515.07 in long-term capital
gains, as shown in Box 2a
(Total capital gain distributions). The investor reports
the sum of all long-term
capital gain distributions
from all sources on Line 13
of Schedule D.
26872 text.qxp
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Page 1
How to use Form 1099-B
A note about Vanguard Brokerage
Services tax forms
In some cases, brokerage tax forms will be available
in late January. Depending on the holdings in the
brokerage account, other forms will be ready in
mid-February. For example, if you received income
in 2008 from an investment classified as a regulated
investment company—such as an open-end or
closed-end mutual fund, real estate investment
trust (REIT), or unit investment trust (UIT)—your
Tax Information Statement will be mailed and
available online by February 17, 2009. The delayed
mailing is an effort to reduce the number of revised
tax forms resulting from income reclassifications
by securities issuers.
If you did not receive income from a regulated
investment company, your Tax Information
Statement will be mailed and available online
by February 2, 2009.
See the tax mailing and online posting schedule
on Vanguard.com for a full listing of tax forms and
their availability.
Capital gains or losses from the
sale/redemption of mutual fund shares
If you sold shares from your taxable Vanguard mutual
fund accounts during 2008, you may have realized a
capital gain or loss that must be reported on Schedule D.
The gross proceeds from that sale will be reported to
you on Form 1099-B, along with instructions on how to
calculate and report the gain or loss on Schedule D of
Form 1040.* Net long-term capital gains realized from
the sale of mutual fund shares are subject to a tax rate
of 15% (5% for lower income tax brackets). Note, however, that net short-term capital gains realized from the
sale of mutual fund shares held for one year or less are
taxed at ordinary income rates.
Form 1099-B lists only your account redemptions and
the gross proceeds for each sale of fund shares. To
complete Schedule D, you must report your gross
proceeds as well as cost basis, holding period for the
shares sold, and gain or loss.
Separate from Form 1099-B, Vanguard provides an
Average Cost Summary Statement that includes (in
most cases) the capital gain or loss information you
need to complete Schedule D. Vanguard uses the
Average Cost Single Category Method to arrive at an
average cost for all fund shares held in your account
up to and including the redemption date. While this is
a commonly used, IRS-approved method for calculating
the cost of shares redeemed, you can choose other
calculation methods that may be more beneficial or
appropriate for you. For more information on tax reporting and calculating tax cost basis, see IRS Publication
564, Mutual Fund Distributions, at the IRS website
(www.irs.gov), or consult with a tax professional for
additional guidance.
*Shareholders in money market funds generally will not
realize a capital gain or loss and will not receive a
Form 1099-B.
What are qualified dividends?
Distributions from U.S. corporations and certain foreign corporations are eligible for reduced tax rates
as “qualified dividends.”
Mutual funds may distribute qualified dividend income
(QDI) to shareholders. Equity and balanced funds are
likely to distribute QDI; money market and bond funds
will not distribute QDI and therefore are not eligible for
lower tax rates.
Vanguard will no longer mail personal QDI statements
to shareholders. For help in determining your personal
QDI, visit the Tax Center on Vanguard.com to use the
“Calculate your qualified dividend income” tool, which
can calculate qualified dividend income generated by
your taxable Vanguard mutual fund shares.
Box 2a (Total capital gain distributions)
Box 2a shows the long-term capital gain distributions
by fund from your taxable Vanguard mutual fund
accounts. See the example in this brochure.
Box 1a (Total ordinary dividends)
Box 1a shows total ordinary dividends, including shortterm capital gain distributions by fund from your taxable
Vanguard mutual fund accounts.
Box 1b (Qualified dividends)
Box 1b shows the portion of the amount in Box 1a
(Total ordinary dividends) that is QDI-eligible for the
reduced 15% or 5% tax rate. To claim the reduced tax
rate for QDI reported in Box 1b, you must have held
your fund shares for at least 61 days during the 121-day
period beginning 60 days prior to the ex-dividend date.
(Also known as the reinvest date, the ex-dividend date
is when the fund’s net asset value is adjusted to account
for distributions.) Your “personal QDI” is the QDI reported to you in Box 1b, reduced, if necessary, by dividends
for which you did not meet the holding-period requirement. For example, if a fund’s ex-dividend date was
6/20/2008, shares would have to have been held for
at least 61 days between 4/21/2008 and 8/19/2008 to
qualify as QDI for that distribution. If the shares do not
meet the holding-period requirement, dividends paid
on those shares do not qualify for the lower tax rates.
REIT Index Fund Form
1099-DIV mailed in February
Shareholders of Vanguard REIT Index Fund
should take note not to file their federal or state
income tax returns until they receive their Form
1099-DIV from Vanguard REIT Index Fund, which
Vanguard mails (with IRS approval) in February.
REITs generally cannot calculate their taxable
earnings until after the end of the tax year. For
this reason, Vanguard seeks an extension from
the IRS each year to mail completed Forms 1099DIV for the REIT Index Fund after the normal
deadline of January 31. Filing your tax returns
prior to receiving the Form 1099-DIV for REIT
Index Fund may require filing amended returns
and may result in the payment of additional taxes.
26872 text.qxp
12/11/08
7:23 PM
Page 1
How to use Form 1099-B
A note about Vanguard Brokerage
Services tax forms
In some cases, brokerage tax forms will be available
in late January. Depending on the holdings in the
brokerage account, other forms will be ready in
mid-February. For example, if you received income
in 2008 from an investment classified as a regulated
investment company—such as an open-end or
closed-end mutual fund, real estate investment
trust (REIT), or unit investment trust (UIT)—your
Tax Information Statement will be mailed and
available online by February 17, 2009. The delayed
mailing is an effort to reduce the number of revised
tax forms resulting from income reclassifications
by securities issuers.
If you did not receive income from a regulated
investment company, your Tax Information
Statement will be mailed and available online
by February 2, 2009.
See the tax mailing and online posting schedule
on Vanguard.com for a full listing of tax forms and
their availability.
Capital gains or losses from the
sale/redemption of mutual fund shares
If you sold shares from your taxable Vanguard mutual
fund accounts during 2008, you may have realized a
capital gain or loss that must be reported on Schedule D.
The gross proceeds from that sale will be reported to
you on Form 1099-B, along with instructions on how to
calculate and report the gain or loss on Schedule D of
Form 1040.* Net long-term capital gains realized from
the sale of mutual fund shares are subject to a tax rate
of 15% (5% for lower income tax brackets). Note, however, that net short-term capital gains realized from the
sale of mutual fund shares held for one year or less are
taxed at ordinary income rates.
Form 1099-B lists only your account redemptions and
the gross proceeds for each sale of fund shares. To
complete Schedule D, you must report your gross
proceeds as well as cost basis, holding period for the
shares sold, and gain or loss.
Separate from Form 1099-B, Vanguard provides an
Average Cost Summary Statement that includes (in
most cases) the capital gain or loss information you
need to complete Schedule D. Vanguard uses the
Average Cost Single Category Method to arrive at an
average cost for all fund shares held in your account
up to and including the redemption date. While this is
a commonly used, IRS-approved method for calculating
the cost of shares redeemed, you can choose other
calculation methods that may be more beneficial or
appropriate for you. For more information on tax reporting and calculating tax cost basis, see IRS Publication
564, Mutual Fund Distributions, at the IRS website
(www.irs.gov), or consult with a tax professional for
additional guidance.
*Shareholders in money market funds generally will not
realize a capital gain or loss and will not receive a
Form 1099-B.
What are qualified dividends?
Distributions from U.S. corporations and certain foreign corporations are eligible for reduced tax rates
as “qualified dividends.”
Mutual funds may distribute qualified dividend income
(QDI) to shareholders. Equity and balanced funds are
likely to distribute QDI; money market and bond funds
will not distribute QDI and therefore are not eligible for
lower tax rates.
Vanguard will no longer mail personal QDI statements
to shareholders. For help in determining your personal
QDI, visit the Tax Center on Vanguard.com to use the
“Calculate your qualified dividend income” tool, which
can calculate qualified dividend income generated by
your taxable Vanguard mutual fund shares.
Box 2a (Total capital gain distributions)
Box 2a shows the long-term capital gain distributions
by fund from your taxable Vanguard mutual fund
accounts. See the example in this brochure.
Box 1a (Total ordinary dividends)
Box 1a shows total ordinary dividends, including shortterm capital gain distributions by fund from your taxable
Vanguard mutual fund accounts.
Box 1b (Qualified dividends)
Box 1b shows the portion of the amount in Box 1a
(Total ordinary dividends) that is QDI-eligible for the
reduced 15% or 5% tax rate. To claim the reduced tax
rate for QDI reported in Box 1b, you must have held
your fund shares for at least 61 days during the 121-day
period beginning 60 days prior to the ex-dividend date.
(Also known as the reinvest date, the ex-dividend date
is when the fund’s net asset value is adjusted to account
for distributions.) Your “personal QDI” is the QDI reported to you in Box 1b, reduced, if necessary, by dividends
for which you did not meet the holding-period requirement. For example, if a fund’s ex-dividend date was
6/20/2008, shares would have to have been held for
at least 61 days between 4/21/2008 and 8/19/2008 to
qualify as QDI for that distribution. If the shares do not
meet the holding-period requirement, dividends paid
on those shares do not qualify for the lower tax rates.
REIT Index Fund Form
1099-DIV mailed in February
Shareholders of Vanguard REIT Index Fund
should take note not to file their federal or state
income tax returns until they receive their Form
1099-DIV from Vanguard REIT Index Fund, which
Vanguard mails (with IRS approval) in February.
REITs generally cannot calculate their taxable
earnings until after the end of the tax year. For
this reason, Vanguard seeks an extension from
the IRS each year to mail completed Forms 1099DIV for the REIT Index Fund after the normal
deadline of January 31. Filing your tax returns
prior to receiving the Form 1099-DIV for REIT
Index Fund may require filing amended returns
and may result in the payment of additional taxes.
26872 covers.qxp
12/11/08
7:01 PM
Page 3
This brochure explains how to report
information from the enclosed Forms
1099-DIV and 1099-B on your tax return
(Form 1040 or 1040A).
How to use Form 1099-DIV
Dividends and capital gain distributions from
taxable mutual fund accounts
Schedule B (Interest and Ordinary Dividends)
If the total of all the ordinary dividends (Box 1a) received
in 2008 from all your investments is more than $1,500, you
must list each source of your ordinary dividend income
on Schedule B (Form 1040) or Schedule 1 (Form 1040A).
If the total of all ordinary dividends received in 2008 from
all your investments is $1,500 or less, you must report it
on Line 9a of Form 1040 or Form 1040A.
Schedule D (Capital Gains and Losses)
You must report total capital gain distributions (Box 2a)
from mutual funds on Schedule D, unless both of the
following exceptions apply:
1. The only amounts you have to report on Schedule D
are capital gain distributions from Box 2a of your
Forms 1099-DIV.
2. None of your Forms 1099-DIV have an amount in Box
2b (Unrecaptured Section 1250 gain), Box 2c (Section
1202 gain), and Box 2d (Collectibles [28%] gain).
If you are not required to file Schedule D, enter your
total capital gain distributions (Box 2a) from all your
investments on Line 13 of Form 1040 and check the box
on that line or enter them on Line 10 of Form 1040A. You
also must complete a Qualified Dividends and Capital
Gains Tax Worksheet included in the Form 1040 or 1040A
instructions to determine your tax due on these amounts.
Reporting requirement for
tax-exempt interest dividends
If you received tax-exempt interest dividends in
2008, Vanguard will report this amount on Form
1099-INT. Tax-exempt interest dividends paid after
December 31, 2005, are reported on Form 1099INT as required by the Tax Increase Prevention
and Reconciliation Act of 2005 (TIPRA), which
was enacted into law on May 17, 2006. Refer
to Vanguard’s update entitled Reporting of 2008
Tax-Exempt Interest Dividends on Form 1099-INT
for information on reporting tax-exempt interest
dividends on your tax return.
For additional help, visit the Tax Center
at Vanguard.com. The Tax Center is
your one-stop source for Vanguard
tax-related information, forms, and
links to handy tools, such as our
Qualified Dividend Income Tax Tool.
www.vanguard.com
26872 covers.qxp
12/11/08
7:01 PM
Page 1
P.O. Box 2600
Valley Forge, PA 19482-2600
Connect with Vanguard® > www.vanguard.com
> Refer to the phone number
on your statement.
© 2008 The Vanguard Group, Inc.
All rights reserved.
BCGB 112008
2009 Reporting of
Mutual Fund Distributions
and Sale/Redemption
of Fund Shares
Tax preparation assistance:
How to use Forms 1099-DIV and
1099-B when you file your tax return