It is up to the financial institution to classify the income correctly. Income downloads from other financial institutions like LPL are correctly classified as short term and long term capital gains. Have you asked Fidelity why they are classifying the income as dividends?
From C. D. Bales:There might be some useful information missing from the original post in this discussion.An individual only has capital gains when they sell shares of a security they own. It's not clear that the original poster did that.There is no such thing as a capital gains "transaction": if a person sells a security, the transaction is a Sell transaction. A Sell transaction may cause a capital gain/loss, but there is no separate transaction for the gain (or loss). If you have sold any shares of securities you own in Quicken for more or less than you paid for them, you can see how Quicken accounts for that by displaying the Investment Transactions report: the "Sold" transactions that had gains or losses will display the category "_RlzdGain" and the amount of the gain/loss.When a mutual fund sells shares of a security they own, they may incur a capital gain. If the mutual fund does have capital gains from the sales of securities they own, the individual that owns shares of that mutual fund will only see "distributions" of those capital gains - which occur in the form of "dividends" with the appropriate long-term or short-term designation.
I understand what you are saying, but if those funds are not in a tax-deferred account, then we are responsible for paying taxes at the proper rate, whether we made the sale or the mutual fund did.