Planning: Tools & Service > Tax Information > Dividend & Capital Gain Distribution Q&A
Dividend & Capital Gain Distribution Q&A

Each year mutual funds must declare distributions. At Thrivent Financial we do our best to provide you with the information you need to plan each year for your taxes. Below are some questions and answers to help you understand distributions and how they may affect you. We also encourage you to discuss the distributions with your tax advisor to discuss impacts and possible tax strategies.

Q.  What is a dividend distribution?
A.  A dividend distribution is income from dividends and interest earned by a mutual fund’s holdings. Dividends that a fund earns must be paid to shareholders at least once per year.

Q.  What is a capital gain distribution?
A.  A capital gain is a profit that a mutual fund realizes by selling securities for a price higher than that at which they were purchased. Capital gains must also be paid to shareholders at least once per year. When distributed to shareholders, any realized gains are offset by any realized losses resulting in a distribution of the net capital gain. Unrealized gains on investments that have increased in value but have not been sold by the fund are not required to be distributed. The daily NAV includes unrealized gains.

Q.  When are dividends and capital gains paid?
A.  Thrivent Financial’s distribution policy is as follows: money market and most bond funds generally declare income dividends daily and distribute them monthly. Income dividends are often paid quarterly for balanced funds (stocks, bonds, and cash). Capital gains (if required) for equity and bond funds are generally paid after fiscal year end and before calendar year end. Thrivent Financial typically distributes capital gains in December.

Q.  How will capital gain and dividend distributions affect my taxes?
A.  Shareholders are required to pay taxes on mutual fund distributions both reinvested and paid out in cash except when earned on qualified retirement accounts (i.e. IRA, 401(k), and 403(b) accounts). If dividend and capital gain distributions are taken in cash on a qualified account, this is considered a distribution from the IRA or 403(b) and may be a taxable distribution.

Dividend distributions are taxed at ordinary income tax rates unless the dividends are qualified dividends. Qualified dividends are dividends that the mutual fund has received from certain domestic and foreign corporations. Qualified dividends are taxed at the same rates as long-term capital gains.

Long-term capital gain (held more than one year) distributions are taxed at long-term capital gains tax rates; distributions of short-term capital gains (held one year or less) are taxed at the same rates as ordinary income. Ordinary income tax rates are generally higher than long-term capital gain tax rates.

Q.  How will I receive the tax information regarding capital gain distribution?
A.  Thrivent Financial provides estimated capital gain information with the third quarter statements each year. The information is also available online and will be updated monthly until the distributions are made. The estimated capital gain information is subject to change based upon fund activity.

Your fourth quarter statement will include the amounts of any capital gain distributions made for the fund. This information will also be available online. For tax purposes, you will need to use Form 1099-DIV to obtain the proper allocation of dividend and capital gain information.

Your Form 1099-DIV will be mailed to you by January 31, 2008, unless you are invested in either the Thrivent Real Estate Securities Fund or the Thrivent Diversified Income Plus Fund (formerly Thrivent High Yield Fund II). Form 1099-DIV will not be mailed until later in February due to the Funds’ holdings in real estate investment trusts (REITs). Funds which invest in REITs must wait until after year end in order to correctly classify the distributions from the fund as a dividend, capital gain, or return of capital.

Q.  Why does Thrivent Financial provide capital gain distribution information for Thrivent Financial Mutual Funds prior to year end?
A.  To ensure that you have the information you need in order to make your investment decisions, Thrivent Financial provides estimated capital gain distribution information to help with year end tax and investment planning. If you have questions regarding your current tax situation, contact your tax advisor for more information.

Q.  Should I wait to buy a fund until after the distributions are made?
A.  If you are considering purchasing a mutual fund within a qualified retirement account, a distribution should not affect the timing of your investment decision since typically they do not have any tax consequences while the assets remain in the account. For new investments within a taxable account, upcoming distributions raise some considerations. The distributions will result in taxable income and should be considered in timing your overall investment decision. There is usually no taxable benefit to purchasing the shares immediately before the distribution (sometimes referred to as “buying the distribution”) since the share price will be adjusted by the same amount as the distribution. You should also keep in mind the amount of the distribution based on the size of your expected investment. While important to consider, tax consequences should be only one of many factors considered when deciding to purchase a mutual fund. 

Q.  Is the fund’s share price affected when a distribution is paid?
A.  On the distribution date, a fund Net Asset Value (NAV) is reduced by the amount of the distribution. (The fund NAV also reflects any changes from the impact in security valuations on the day the distribution is paid.)

Q.  Does a fund’s distribution affect its total return?
A.  No, distributions do not impact total return. Although the NAV drops when the distribution is paid, shareholders who reinvest their distributions also receive more shares. Shareholders that receive their distributions in cash will have a lower account value after distribution but will have received the cash.

Q.  How do I determine if I will receive a distribution and when I will receive it?
A.  The timing of a distribution, and the determination of which customer is eligible to receive it is based upon the record date. The ex-dividend date is the payable date.

• Record Date: All shareholders who own shares as of the end of this day are eligible to receive the distribution. This date is usually the business day prior to the ex-dividend date.
• Ex-dividend Date/Payable Date: The date on which the distribution amount per share is deducted from the fund’s net asset value per share. The fund pays customers their share of the distribution on this date.

Q.  Who should I contact if I have more questions?
If you have more questions about your mutual fund account, please contact our Customer Interaction Center at 1-800-THRIVENT (847-4836).

Thrivent Financial for Lutherans, and its respective associates and employees cannot provide legal, tax or accounting advice or services. Work with your team of professionals, including your Thrivent Financial representative, your attorney and tax professional to determine and implement the appropriate option. Securities are offered through Thrivent Investment Management Inc., 625 Fourth Ave. South, Minneapolis, MN 55415-1665, 1-800-THRIVENT (800-847-4836) a wholly owned subsidiary of Thrivent Financial for Lutherans. Member FINRA. Member SIPC.