Fixed Income FAQs:
Tax Information (Year-To-Date)

• Can I use the tax information displayed on this page for tax preparation?

  The reported tax information may not reflect all adjustments necessary for tax reporting purposes and may not be appropriate for use in preparing a tax return. You should use the official tax forms that Fidelity delivers for purposes of tax return preparation.

• What is return of principal?

  A return of principal is a return of the investment of a debt obligation by the borrower. A return of principal reduces cost basis and, once cost basis is exhausted, the return of principal is reported as proceeds on the 1099-B and reconciled as either a short or long-term realized gain or loss.

• How does Fidelity report wash sale information?

  The IRS rules state that broker-dealers are only required to report wash sale adjustments if the activity occurs with the same account and same CUSIP number. Certain types of wash sale activity are not reported by the broker-dealer, but clients should consult a tax advisor to ensure their wash sale calculations comply with the requirements to compute wash sales under Internal Revenue Code Sec 1091. The Form(s) 1099-B should be reviewed to reconcile wash sale activity.

• What is tax-exempt income?

  Tax-exempt income refers to interest from municipal bonds as well as distributions from mutual funds that qualify as exempt interest dividends and could be exempt from federal taxes. Fidelity is required to report this information to the IRS, and may be required to report the information to state tax authorities. The total amount or a portion of tax-exempt income, reported on the Consolidated Tax Reporting Statement must be taken into account in computing the federal alternative minimum tax applicable to individuals, and may be subject to state and local taxes. Your state tax return will contain specific instructions for reporting this income.

• What is market discount and how does Fidelity calculate realized market discount income?

  Fixed income securities acquired at a market discount are generally purchased on the secondary market at less than the stated redemption price, or in the case of OID securities, purchased on the secondary market at less than the adjusted issue price. Market discount is the amount paid below the par value of the fixed income security. Under federal tax rules, market discount that is less than 0.25% of the stated redemption price (or OID-adjusted issue price) of the bond multiplied by the number of full years to maturity remaining at acquisition is treated as zero.

  There are various rules and elections available for the treatment of market discount on your return, each of which may result in a different tax result. These rules only apply to fixed income securities issued with more than one year to maturity. Fidelity's calculation of realized market discount income assumes you elected to defer recognizing the market discount until the sale (or other disposition) of the security, and assumes you elected to use the constant yield method from acquisition date through disposition date. Under this election, no market discount is recognized if the bond is sold at a loss. Other elections available under tax laws may be more beneficial, depending on your individual tax situation. To update your elections, fill out the Fixed Income Reporting Instructions form. For Federal tax purposes, market discount income from both taxable and tax-exempt bonds is treated as taxable interest income. To update your elections, fill out the Fixed Income Reporting Instructions form.

  Acquiring securities issued with one year or less to maturity at a discount may result in an acquisition discount. Different rules apply to the treatment of a gain or loss for these securities.

  Consult your tax advisor and IRS Publication 550, Investment Income and Expenses for additional information.

• What is amortized premium and how does Fidelity calculate it?

  Premium generally arises when a fixed income security is purchased for an amount greater than the total of all amounts payable on the bond other than qualified stated interest. According to federal tax rules, if you acquired your fixed income security at a premium and make the required elections when you file your return, the premium is amortized annually using the constant yield method (also called the yield to maturity method) with semi-annual compounding. If you did not make the required elections, your gain or loss is the difference between your purchase price (as adjusted for wash sales and other required adjustments, if any) and your proceeds at disposition, making no premium adjustments. These rules apply to securities issued at par and to OID securities acquired on the secondary market at price greater than their maturity value. Fidelity calculates amortized premium (and makes corresponding adjustments to the cost basis it provides) using the yield-to-maturity method. For tax-exempt securities, amortization of premium is required and is not deductible from taxable income. For taxable bonds, a tax election may be required in order to amortize premium, and the current year's amortized premium may be deductible from taxable income. The amortized premium amounts and adjusted cost basis Fidelity provides may not reflect all adjustments necessary for tax reporting purposes. It may not be applicable if you have not made an appropriate tax election or if you are using an alternative amortization calculation method. Review prior adjustments that you have made, and consult your tax advisor and IRS Publication 550, Investment Income and Expenses, for additional information.

• What is acquisition premium and how does Fidelity calculate acquisition premium amortization?

  When fixed income securities issued with original issue discount (OID) are purchased at a premium over the adjusted issue price (plus any accreted OID income), the premium, called an acquisition premium, must be amortized and reflected in the calculation of the adjusted cost basis. This amortization will impact the taxable income you will recognize each year. Fidelity calculates acquisition premium amortization (and makes corresponding adjustments to adjusted cost basis it provides) on the assumption that you elected to use the ratable accrual method in which OID income is reduced by the pro-rata portion of the acquisition premium attributable to each year's OID earned. If you elected an alternative amortization calculation method, the acquisition premium amount Fidelity calculates may not be applicable. The acquisition premium amounts and adjusted cost basis Fidelity provides may not reflect all adjustments for tax reporting purposes. Review prior calculations and adjustments you have made and consult your tax advisor and IRS Publication 550, Investment Income and Expenses, for additional information.

• Does Fidelity calculate realized market discount income, amortized premium and acquisition premium for all applicable fixed income securities?

  No. Fidelity does not provide amortization, accretion, and similar calculations (or corresponding adjustments to cost basis) for certain fixed income securities (and some bond-like equities), such as short-term instruments, Investment Unit Trusts, or those that are subject to early prepayment of principal (pay downs).

• What is ordinary income/loss from dispositions of contingent debt instruments?

  Fidelity provides an estimate of the ordinary income/loss recognized from dispositions of contingent payment instruments based on the adjusted cost basis information in its records. Under IRS regulations, gain (if any) on disposition of a contingent payment debt instrument is usually treated as ordinary income. Any loss, to the extent that the loss is less than or equal to previously earned interest, is usually treated as an ordinary loss. Any loss greater than previously earned interest is usually treated as a capital loss.

Ordinary Dividends and Distributions

• How are ordinary dividends and distributions reported to me?

  These earnings are reported to you on tax form 1099-DIV, Dividends and Distributions.

• Can I use the tax information displayed on the Tax Information (Year-to-Date) Ordinary Dividends and Distributions page for tax preparation?

  The reported tax information may not reflect all adjustments necessary for tax reporting purposes and may not be appropriate for use in preparing a tax return. you should use the official tax forms that Fidelity sends by mail for purposes of tax return preparation.

• What does the Detail Info for Ordinary Dividends and Distributions page show?

  This page provides an itemized list of the payment of dividends and distributions for the selected account for the selected tax year. Securities are ordered by CUSIP, and dividend amounts are listed in chronological order by payment date. Short-term capital gain distributions are combined with dividend distributions and are reported as ordinary dividends for tax reporting purposes.

• What does the Detail Info for Capital Gain Distributions page show?

  This page provides an itemized list of the capital (taxable) gains distributions for the selected account for the selected tax year. The gains are divided into 28%-gains, unrecaptured Section 1250 gains, qualified 5-year gains, and Section 1202 capital gains categories. Securities are ordered in each category by CUSIP, and capital gain payments for each security are listed in chronological order by payment date.

  Beginning with distributions paid in 2001, a portion of the long-term gain dividend may be qualified 5-year capital gains and eligible for a reduced capital gain rate if the gain would otherwise have been taxed at 10%. Consult your tax advisor, who is familiar with your particular situation, for more details.

• What does the Detail Info for Non-dividend Distributions page show?

  This page provides an itemized list of non-dividend distribution payments for the selected account for the selected tax year. Securities are ordered by CUSIP, and distribution amounts are listed in chronological order by payment date.

• What does the Detail Info for Federal Income Tax Withheld page show?

  This page provides an itemized list of the federal income tax withheld on dividends and distributions income for the selected account for the selected tax year. Securities are ordered by CUSIP, and the federal income tax withholdings are shown in chronological order by withheld date and then totaled.

• What does the Detail Info for Foreign Tax Paid page show?

  This page provides an itemized list of the foreign tax withheld for the selected account for the selected tax year. Securities are ordered by CUSIP, and the foreign tax withholdings are shown in chronological order by withheld date and then totaled.

• Do the detail pages show all my transactions for the selected tax year?

  The detail pages display a maximum of 180 individual transactions. If more than 180 transactions took place during the tax year selected, only the first 180 transactions are displayed, and the total at the bottom of the page is not displayed. However, the total of all transactions, including those not displayed on this screen, is displayed in the relevant field on the Ordinary Dividends and Distributions screen (for example, the total of all foreign tax withholding transactions is displayed in the Foreign Tax Paid field).

• What are qualified dividends?

  The rate on certain Qualified Dividend Income (QDI) is the capital gains tax rate (maximum rate of 20%) from the ordinary income tax rate (maximum rate of 37%). Generally, dividends from U.S. companies are QDI; however, dividends from foreign companies are eligible for the lower tax rate when certain tests are satisfied.

Interest Income

• How is interest income reported to me?

  These earnings are reported to you on tax form 1099-INT, Interest Income.

• Can I use the tax information displayed on the Interest Income page for tax preparation?

  The reported tax information may not reflect all adjustments necessary for tax reporting purposes and may not be appropriate for use in preparing a tax return. You should use the official tax forms that Fidelity sends by mail for purposes of tax return preparation.

• What does the Detail Info for Non U.S. Treasury Bonds & Notes Interest page show?

  This page provides an itemized list of the payments of interest on non U.S. Bonds and Notes for the selected account for the selected tax year. Securities are ordered by CUSIP, and the interest payments are listed in chronological order by payment date.

• What does the Detail Info for U.S. Treasury Bonds & Notes page show?

  This page provides an itemized list of the payments of interest on U.S. Treasury Bonds and Notes for the selected account for the selected tax year. This includes interest on the savings bonds, Treasury bills, Treasury bonds, and Treasury notes. Securities are ordered by CUSIP, and the interest payments are listed in chronological order by payment date.

• What does the Detail Info for Federal Income Tax Withheld page show?

  This page provides an itemized list of the federal income tax withheld on interest income for the selected account for the selected tax year. Securities are ordered by CUSIP, and the federal income tax withholdings are shown in chronological order by withheld date and then totaled.

• Do the detail pages show all my transactions for the selected tax year?

  The detail pages display a maximum of 180 individual transactions. If more than 180 transactions took place during the tax year selected, only the first 180 transactions are displayed, and the total at the bottom of the page is not displayed. However, the total of all transactions, including those not displayed on this screen, is displayed in the relevant field on the Interest Income screen (for example, the total of all individual interest payments for non U.S. Treasury Bonds and Notes is displayed in the Non U.S. Bonds & Notes field).

Miscellaneous Income

• How is miscellaneous income reported to me?

  Miscellaneous income and the federal income tax that has been withheld are reported to you on tax form 1099-MISC, Miscellaneous.

• Can I use the tax information displayed on the Miscellaneous Income page for tax preparation?

  The reported tax information may not reflect all adjustments necessary for tax reporting purposes and may not be appropriate for use in preparing a tax return. you should use the official tax forms that Fidelity sends by mail for purposes of tax return preparation.

Original Issue Discount

• What is original issue discount (OID)?

  OID reports the earned portion of the difference between the stated redemption price at maturity (if greater than one year) and the issue price of a bond, debenture, note, or other evidence of indebtedness.

  Tax reporting of OID obligations is complex; if you paid acquisition or bond premium, or if the obligation is a stripped bond or stripped coupon, you must compute the proper amount of OID. Fidelity generally makes OID adjustments to your basis in OID obligations in the Realized Gain/Loss sections of the Fidelity Tax Reporting Statement. If you must compute your proper OID, refer to IRS Publication 1212, Guide to Original Issue Discount (OID) Instruments, to figure the correct OID.

• How is original issue discount reported to me?

  OID amounts are reported to you on tax form 1099-OID, Original Issue Discount.

• Can I use the tax information displayed on the Original Issue Discount page for tax preparation?

  The reported tax information may not reflect all adjustments necessary for tax reporting purposes and may not be appropriate for use in preparing a tax return. You should use the official tax forms that Fidelity sends by mail for purposes of tax return preparation.

Realized Gain/Loss

• What information is available on the Realized Gain/Loss page?

  This page displays trade details of the selected account's short- and long-term gains, short- and long-term losses, and wash sales, as defined by the IRS, grouped by security for the selected tax year.

  All trade details are grouped and summarized at the security level. You can click the + icon next to each symbol to expand and view all trade details for that security in the selected account and tax year.

  This page also displays details for any trades with Unknown Cost Basis in the selected account during the selected tax year. Cost basis is the dollar amount originally paid for a security, including the amount of reinvested dividends, reinvested capital gains, and adjustments for all subsequent activity such as corporate actions and wash sales.

• What information is not available on the Realized Gain/Loss page?
  Due to current tax law, certain securities such as U.S. Treasury bills are exempt from reporting on the standard 1099-B when they are sold prior to maturity. Investors may still have a tax obligation on the sales of these securities. Please consult your trade confirmations for relevant transaction history. You may also wish to contact your tax advisor.
• What are the reasons for unknown cost basis?

  Unknown cost basis occurs when cost information is missing or incomplete. This can occur due to several different reasons but is most commonly attributed to transfers from other financial institutions.

• Can I use the information displayed on the Realized Gain/Loss pages for tax preparation?

  The reported tax information may not reflect all adjustments necessary for tax reporting purposes and may not be appropriate for use in preparing a tax return. You should use the official tax forms that Fidelity sends by mail for purposes of tax return preparation.

• Why are some of my losses deferred?

  Wash sales occur when a reacquisition of shares takes place within a 61-day period (beginning 30 days before and ending 30 days after the sale or disposition took place) of a sale or disposition at a loss. The disallowed loss is added to the cost basis of the newly acquired shares. This disallows or defers the loss so that the customer may eventually realize the loss when the additional shares are sold.

• How is cost basis at the time of sale determined?

  The sale of shares creates a realized gain or loss that the client must report to the IRS. Generally, sell transactions reduce both the number of shares in the position and the position's cost basis. Sales include exchanges, which sell shares from one account or position before buying shares in another.

Tax-Exempt Income

• What does the Detail Info for Tax-Exempt Income section show?

  This section lists federal tax-exempt interest and exempt interest dividends you received, by security. It also lists any portion of those payments that is classified as specified private activity bond interest. The securities are listed in order of their CUSIP number, and the tax-exempt payments are listed by payment date, in chronological order.

• How is tax-exempt income reported to me?

  The total amount of tax-exempt income is reported on the Consolidated Tax Reporting Statement. The portion (if any) of that total amount constituting specified private activity bond interest is also reported on the same tax form. Each interest payment you received is listed in the Supplemental Information section of your Tax Reporting Statement.

• Is tax-exempt income subject to any type of taxation?

  Although tax-exempt income is generally not taxable at under the regular federal income tax, please keep in mind that a portion of this income may be subject to state and local taxes and/or the federal alternative minimum tax. Fidelity does not report this information to the IRS, but may be required to report the information to California or other state tax authorities.

• Are all of the payments of tax-exempt income that I received for the selected tax year displayed?

  The Detail Info for Tax-Exempt Income section displays a maximum of 180 individual payments. If you received more than 180 payments of tax-exempt income during the selected tax year, only the first 180 payments will be displayed. However, the total of all payments of tax-exempt income received, including those not displayed on this page, is displayed in the relevant field on the Tax Information page.

• Can I use the tax information displayed on the Account Detail Info for Tax-Exempt Income page for tax preparation?

  The reported tax information may not reflect all adjustments necessary for tax reporting purposes and may not be appropriate for use in preparing a tax return. You should use the official tax forms that Fidelity sends by mail for purposes of tax return preparation.

• What is specified private activity bond interest and why are you giving me this information?

  Specified Private Activity Bond Interest is interest paid by private activity bonds, issued to encourage private-sector investment in the development of certain facilities which serve various specified public purposes, and exempt interest dividends paid by mutual funds that are attributable to such interest. Specified private activity bond interest is reported on the Consolidated Tax Reporting Statement. The tax-exempt income reported by Fidelity includes amounts that are treated as specified private activity bond interest, if applicable. Specified private activity bond interest must be taken into account in computing the federal alternative minimum tax.

• For mutual funds, is the current year's specified private activity bond interest an estimation?

  Yes. Current-year specified private activity bond interest for mutual funds is not known until after December 31. Therefore, the amount displayed for the current year is an estimation that is based on data from the prior year. Unlike mutual funds, specified private activity bond interest for individual bonds is known for the current year. Therefore, for individual bonds, the actual amount of specified private activity bond interest is displayed.