Why are nondividend distributions reported to the IRS on Form 1099–DIV?
Fidelity is required to report these distributions to you and to the IRS. Nondividend distributions generally reduce your basis in your shares (but not below zero). This becomes important when you sell your shares and need to calculate your gain or loss. However, a nondividend distribution is taxable as (and must be reported as) a capital gain to the extent that it exceeds your adjusted basis in the shares.
