<prompt> Human: If I bought 4000 worth of shares in mutual funds and at the end of the year the mutual fund is worth 5000 but I dont sell it, do I have to declare the 1000 increase in its value as taxable income? Or do I only have to declare the dividends, if any?  <response>: Unfortunately this isnt a simple question, and will vary by fund and what the fund bought or sold during the year. The fund is required to distribute to you, your share of any realized capital gains or losses it took during the year. You could owe taxes if the fund ended up realizing a lot of capital gains during the year, but its also possible you could have a tax writeoff if the fund realized capital losses during the year.The fund should provide you a consoldated 1099 statement which will breakdown your portion of interest, dividends, or capital gainslosses during the year. Your 1099 will detail if you have to pay any capital gains in the 1099-B section. 