Form 2439, the Notice to Shareholder of Undistributed Long-Term Capital Gains, comes from a regulated investment company (RIC, usually a mutual fund) or a real estate investment trust (REIT) that kept some long-term capital gains instead of paying them out, and paid tax on them for you. You report the gain in box 1a as a long-term capital gain, and you claim the tax in box 2 back as a credit on your own return.
All of this comes from Form 2439 and its instructions (Rev. November 2021), the revision in use as of October 2026.
Why you got a Form 2439
A fund or REIT can choose to retain long-term gains and pay the tax itself. You're still treated as receiving your share, so the fund sends Copies B and C of Form 2439 and attaches Copy A to its own Form 1120-RIC or 1120-REIT. It has to send your copies by the 60th day after the end of its tax year. If your shares sit in an IRA, the copies go to the IRA trustee or custodian, not to you.
What each box means and where it goes
| Box | What it shows | Where individuals report it |
|---|---|---|
| 1a | Total undistributed long-term capital gain | Long-term capital gain on Schedule D (Form 1040), line 11, column (h) |
| 1b | Unrecaptured section 1250 gain | The Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions |
| 1c | Section 1202 gain (qualified small business stock) | See the QSB stock exclusion rules in the Schedule D instructions |
| 1d | Collectibles (28%) gain | The 28% Rate Gain Worksheet in the Schedule D instructions |
| 2 | Tax the fund or REIT paid on the box 1a gain | Claimed as a credit on Schedule 3 (Form 1040), on the line for this credit |
Boxes 1b, 1c and 1d are parts of box 1a, not extra income. Report box 1a in full as the gain, then use the smaller boxes only for the special-rate worksheets.
Box 2 is the part people leave on the table
The tax in box 2 was paid on your behalf, so it's yours to claim. Individuals, nonresident aliens, estates and trusts use the line on Schedule 3 (Form 1040) or Schedule G of Form 1041 that the current instructions point to. Skip it and you've paid tax twice on the same gain: once through the fund, and again when you report box 1a.
How other shareholders report it
- Corporations report box 1a in Part II of Form 8949 and claim box 2 on Form 1120, Schedule J, or the matching line of their own return.
- S corporations and partnerships pass each item through to owners on Schedules K and K-1.
- Exempt organizations and IRA trustees claim the refund of the box 2 tax through Form 990-T.
Reading a Form 2439 in the right order
- Check the fund's tax year at the top. The form covers the fund's or REIT's tax year, and you report it on your return for the tax year that includes the last day of that fund year, as Copy B says.
- Put box 1a on Schedule D as a long-term capital gain, which is exactly how the shareholder instructions tell individuals to report it.
- Run boxes 1b, 1c and 1d through the special worksheets only if they show an amount.
- Claim box 2 as a credit on the line the current Schedule 3 names.
- File Copy C with your records, next to your purchase records for the fund.
The form may show only the last four digits of your SSN for your protection. That's fine: the fund has reported your full number to the IRS. If the form arrives marked Corrected, use the new figures and check whether a return you've already filed needs changing.
If you're a nominee
If you received the form for shares you don't own, you must issue Forms 2439 to the actual owners. That means completing Copies A to D for each owner with amounts that agree with what you received, writing Nominee on your Copy B, and filing it with the IRS. The deadline is 90 days after the end of the fund's tax year, 70 days for a custodian of a unit investment trust and 150 days for a nominee resident abroad.
Form 2439 and your cost basis
Form 2439 also counts as the fund's report of an action affecting basis. The IRS instructions for Form 8937 say a RIC or REIT that timely gives Form 2439 to everyone meets its basis reporting duty this way, and that RICs, REITs and brokers holding the shares must adjust basis using the Form 2439 figures. Check your broker's basis records for these shares after the year closes, so a later sale isn't taxed on the wrong number.
Fund distributions that were paid out in cash arrive on a different form, the 1099-DIV, so don't mix the two up.
The verdict
Form 2439 looks alarming because it reports a gain you never received as cash, but the deal is fair once both sides are on your return: box 1a goes in as a long-term gain and box 2 comes back as a credit. Put both on the same return, and keep the form with your basis records for when you sell.
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The issuer's side of an action that changes your basis is explained in the share basis report guide.
Frequently asked questions
What is Form 2439?
It's the Notice to Shareholder of Undistributed Long-Term Capital Gains that a RIC or REIT sends when it keeps long-term gains and pays tax on them for its shareholders.
Where do I report Form 2439 box 1a?
Individuals report it as a long-term capital gain on Schedule D (Form 1040), line 11, column (h).
How do I claim the tax in box 2 of Form 2439?
Individuals claim it as a credit on the line of Schedule 3 (Form 1040) that the current year's instructions name for tax paid on undistributed capital gains.
When should I receive Form 2439?
The fund or REIT must give you Copies B and C by the 60th day after the end of its tax year.
Who gets Form 2439 if the shares are in an IRA?
The copies go to the IRA's trustee or custodian, not to the owner of the IRA.
Do boxes 1b, 1c and 1d add to box 1a on Form 2439?
No. They're portions of the box 1a gain that need special treatment, such as the collectibles gain in box 1d, so they aren't extra income on top of it.
