Capital gain distributions are also called capital gain dividends. They come from mutual funds and real estate investment trusts. They are taxed at the lower long-term capital gains rate, regardless of how long the taxpayer holds the shares. Capital gain distributions are reported to the taxpayer on Form 1099-DIV.
While you may enter these distributions in the dividend section of the tax software, these distributions will appear as long-term capital gains on Form 1040 and on Schedule D if required.
Capital gains are not the same as capital gain distributions. A capital gain distribution is the owner’s portion of the capital gains that were realized when the mutual fund or real estate investment trust sold assets. Alternatively, a capital gain occurs when the owner of a mutual fund or other capital asset sells the asset for more than its cost.