Capital Gain Distributions

Capital Gains Distribution

An amount of money paid to shareholders of a mutual fund from its capital gains over the course of a year. That is, a mutual fund takes its capital gains over a year and divides them among shareholders, who are then responsible for capital gains taxes. Capital gains distributions are usually made at the end of each calendar year and they reduce the fund's net asset value. Because of the existence of capital gains distributions, some analysts advise against purchasing mutual funds at the end of a calendar year because a shareholder will become instantly liable for capital gains taxes.

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Capital Gain Distributions

Amounts paid by mutual funds, regulated investment companies, and real estate investment trusts that represent the shareholder's portion of gain from the sale of capital assets owned by these investment companies. Capital gain distributions are taxed in the year constructively received and are always considered to be held long term.